CHANCELLOR Alistair Darling's insistence that lenders must start advancing cash again seems to be falling on deaf ears, as borrowers continue to find acquiring a mortgage as easy as getting blood out of a stone.
Freeing up the mortgage market is vital to halt the downward spiral in house prices, which, according to Nationwide, were 15% lower by the end of October than a year before.
Yet prospects are not looking good. Many lenders have simply ignored the
Bank of England's 0.5% base rate chop, and have left their standard rates unchanged.
The numbers of mortgages approved but not yet lent – a key indicator of the way the market is heading – is down by two-thirds on a year ago and this trend is expected to continue for some time.
Even lenders with money to spare are being difficult. Good quality borrowers who would normally expect to be greeted with open arms find they are being asked to jump through endless hoops before their mortgage is finally signed off.
Charcol's Ray Boulger said: "We are still seeing loan applications which would have sailed through six months or so ago automatically taking much longer and lenders asking more and more questions.
"This can be worrying for borrowers, who can't always see the relevance of the question, and wonder what the lender is trying to establish."
In a recent case where the property and mortgage application were solely in one man's name, the lender asked to see the bank statements of his wife, even though she didn't work.
Essentially, borrowers have to tick every box and then some more if they are to have any hope of getting the loan they have applied for.
Many lenders have set criteria, with most having dropped to 85% the proportion of a property's value they will lend on favourable terms.
Some banks, including Halifax Bank of Scotland and Royal Bank of Scotland, will still advance 95% of a property's value, but only on a five-year fixed deal, which is hardly going to be a bargain if rates fall as anticipated. It could also be inflexible if you need to change your plans within five years.
Most lenders will claim to lend roughly four times joint earnings. But behind the scenes they will conduct a credit score, and they can tweak this hurdle as high as they like for any individual applicant, bouncing would-be borrowers for seemingly unfathomable reasons.
Valuations are also proving troublesome. Surveyors are down-valuing properties as asking prices fall, and being more conscientious in alerting lenders to potential problems.
New-build property too is a headache. Some lenders will no longer advance funds at all on newly built property, while those that do look for much larger deposits.
David Hollingworth of brokers L&C said: "Lenders are looking for reasons not to lend rather than to lend. Any problem and they would rather walk away. Surveys can be a big headache. Firstly, borrowers may have an inflated view of what their property is worth given price falls, and then the surveyor comes in and undercuts what a realistic valuation might have been.
"This way, instead of needing 65% or 75% of the value of the property, borrowers discover they need 85% or 90%, and they become upset when they are turned down."
But there is good news. Some lenders are easier to deal with, and, despite being sticklers for box-ticking, will still get you through the application process.
Abbey, for example, has cut the cost of its fixed deals, and to help first-time buyers has also launched a new First Home Saver deposit account, paying 8% on monthly savings.
It is designed for 16 to 35-year-olds who can pay between £100 and £300 a month towards a deposit, and there are no withdrawal penalties, although customers who miss a payment will receive a rate of 0.10% for that month only.
Alliance & Leicester has also cut its fixed rates, although it is primarily lending to borrowers with a 25% deposit only, although it will consider those with 15% to put down but only on a limited range of its deals.
Another light on the horizon is that the three-month interbank rate on which mortgages are priced is still falling and is now at 5.8%. While still an uncomfortable margin of 1.3% above base rates of 4.5%, it is at least moving in the right direction and closing the gap.
Even more encouraging is the expectation that the Bank of England will cut rates again, perhaps by 0.5%, which should free up the market further.
Meanwhile, if you are looking to remortgage with the least pain, it is probably worth trying the Abbey, Woolwich, HSBC and First Direct. C&G is also lending, but it operates on a decision-by-computer system. If the computer says no, there is no room to argue your case.
The Nationwide is still lending, but be prepared to face the third degree of questioning.
Of those still looking for business, we look at who is lending what:
HalifaxThe Halifax will grant a mortgage as large as 95% of the value of a property, but only on a five-year fixed rate basis. It does not base the size of a loan on a multiple of earnings, but looks at overall affordability.
Boulger said: "Right now the Halifax isn't particularly attractive except at the very low levels of loan to value. This would seem to me to be a sign that it isn't desperate to lend."
Best deals: two-year fix at 4.69% for a £495 fee, for 60% loan-to-value, or five-year at 5.97% for same fee and value.
AbbeyAbbey is focusing its deals on borrowers with a 25% or larger deposit, because it believes this is where the bulk of applications are coming from. It will lend up to 85% and will even go as high as 95% although only a five-year fixed deal is available at this level. It credit scores applicants individually, examining all their outgoings.
Best deals: three-year fix for borrowers looking for an advance of only 60% of the value pay 5.49% fixed for three years with a £495 fee, and those applying for a 75% loan-to-value can pay 5.554% with a £995 fee.
HSBC and First DirectHSBC is Europe's largest bank and also owns telephone and internet bank First Direct. The group has been largely untouched by the banking crisis and has good products. However, the avalanche of business heading its way has led to some service problems.
Both will lend up to 90%, and assess affordability customer by customer. However, on some loans, such as the lifetime tracker, you can only borrow 3.5% of your income if you are borrowing on your own or 2.75% joint incomes.
Best deals: HSBC two-year 0.96% discount off its standard rate with a £249 fee for borrowers looking for a 60% advance. First Direct lifetime tracker shadows base rate at a 0.99% margin giving a current pay rate of 5.49% with £399 fee.
NationwideThe UK's biggest building society is largely lending only up to 85% of the value of a property, although it says it will consider applications for 90% mortgages in special circumstances. It will lend 4.1% times joint incomes.
Best deals: two-year tracker at 1.18% over base rate, giving a current pay rate of 5.68% with a £599 fee.
WoolwichWoolwich will still lend up to five times income for the right borrower, but says average loan sizes is closer to 3.25% earnings. It will lend up to 85% for a purchase or 80% for a remortgage.
Best deals: lifetime tracker for borrowers looking for 60% advances. It has no fee but tracks at 1.29% above base giving a pay rate of 5.79%. Alternatively, pay a £995 fee and you can track at 1.09% above base giving a pay rate of 5.59%.
YorkshireThe Yorkshire says it hasn't changed its lending criterion at all, because it has always been cautious. But it will lend up to 85% of the value of a property, and four times joint income.
Best deals: with a 25% deposit you can borrow at 4.99% for two years or 5.89% for 10 years and a £495 fee.
SkiptonIt will lend up to 85% of the value of a property, although it has a 95% first-time buyer loan which requires a parental guarantee. It does not use income multiples but credit scores.
Head of lending Colin Dale says: "We look at an applicant in the round, and assess all their income and outgoings and where they are in life in terms of commitments."
But he stresses money is available for quality applications on all kinds of properties.
Best deals: three-year fix at 5.59% for borrowers with 40% deposit, and a £895 fee, rising for higher loan-to-value. A seven-year fix is at 5.59% for 40% deposit with the same fee.
