Potential homebuyers are being put off applying for mortgages due to the strict lending criteria being imposed by banks and building societies, a survey has revealed.
In a survey conducted by the National Association of Estate Agents (NAEA), 58% of those questioned said that mortgage lenders were making conditions increasingly difficult for them to secure a mortgage. They also felt that restrictions would have to be relaxed in order for them to be able to buy a property.
Uncertainty in the housing market has resulted in banks adopting a more prudent approach to lending to the point where responsible customers are finding it almost impossible to secure credit.
The survey found that 22.5% of people said they no longer fulfilled the criteria needed to secure a mortgage with a further 58% saying that tighter restrictions were counter-intuitive and that lenders would need to increase the availability of credit if the property market was to make any kind of recovery.
Mortgage lenders have been criticised for their heavy-handed approach to lending as they continue to demand high deposits from borrowers while reserving the best deals for those with high equity stakes.
The problems in the mortgage market have intensified the housing market correction, and economists have warned that any recovery in house prices is likely to be fitful while the mortgage drought continues.
The Bank of England is set to announce plans to increase the level of quantitative easing by injecting a further £25 billion into the UK economy as net lending plummeted to a record low of £324 million in May.
Peter Bolton King, chief executive of the NAEA, said: "We cannot let the banks convince us that shutting up shop when it comes to mortgage lending is a responsible move. The decision to restrict mortgages so severely is rooted in self interest."
"The Government must do more to put pressure on those banks that are refusing to lend, while highlighting those banks that are easing restrictions to help get the economy moving again."
"It is time to accept that responsible lending to responsible people is necessary for the country."
Copyright © Press Association 2009