With so many first time buyers afraid to take out a mortgage due to the credit crunch and lending shortage that is leaving many in fear of getting turned down for fixed mortgages property brokers have invented a new type of investment fund that invites first time buyers to get their hands on the rungs o the ladder by paying only a 5% deposit without the need for a mortgage at all.  The group was launched by the Mill Group and offers first time buyers the chance to invest their funds into buyer deals at up to 95% of the total LTV, but industry pundits are sceptical about the idea.

The way it works is those interested in buying a home must purchase 5% of the cost of the home and then investors will put up the costs o the 95% remaining portion without involving an actual mortgage lender.  In exchange, the first time buyer will pay a monthly charge on their investment and are expected to pay out the remaining total over the next five or so years with a standard interest mortgage rate attached on the loan.  At this point if they cannot afford to buy out the remaining investment they can secure a mortgage from a lender hitched on the idea that creditors will be offering more loans down the line as the economy stabilizes.

However, Personal Touch Financial Services sales director Dev Malle comments that although the new scheme is unique, it will not offer the same type of protection that any FSA mortgage would.  He added that there is concern that terms, payments, mortgage rates, and interest will fluctuate at terms that are convenient to the investor and not the first time buyer leaving plenty of room for problems in an agreement that is not regulated by the FSA.

The obvious problems are of course what would happen if a borrower fell behind in payments and if it would simply be easier for borrowers to wait five years to purchase a home instead saving money to put forth on their own mortgage deposit without the investment risk.

The Council of Mortgage Lenders (CML) has reported that of all mortgages approved in August only 25% accounted for re-mortgages – the lowest overall proportion seen in the past ten years. For the month of August re-mortgage numbers amounted to a mere 25,000, a 13% drop in month-on-month figures and an overall 19% drop in year-on-year numbers. This is seen to be the result of a number of factors, the least of which is the current trend for many banks to limit their overall funding to many individuals in light of the employment market becoming more and more unstable and thus affecting the financial security of any lending operation.

The shift in financial funding being granted in terms of re-mortgages becoming harder and harder to obtain is no new concept for many households thanks in no small part to increased mortgage lending regulations over the past few months. Many current re-mortgage deals are even being moved off of their current rate to the lending institution’s standard variable rate (SVR) should the borrowers be unable or unwilling to apply for another re-mortgage – not necessarily bad news for many as the SVRs of a large number of lending institutions is actually much more favourable than the rates offered on many current re-mortgages.

The record low may be bad news for many first-time buyers, however, as a large number of these require funding from their family in order to secure a home of their own. With increased limitations on funding to family this can in turn affect many young individuals or couples looking to get a home of their own and as such can only work to exclude many individuals from the property market.

Mortgage approvals are still remarkably low this quarter, with prospective home owners feeling that obtaining funding for the purchase of a new home is no easier now than it was this July. In fact, the only shift to be seen in many areas is a growing lack of confidence in home prices maintaining or gaining value, with only 63% of all respondents to recent surveys stating that they feel prices will rebound again as compared to 78% just a few months prior.

The recent decline in mortgage approvals is hitting not only tracker and fixed-rate mortgages but even the re-mortgage market as more and more households shift their focus away from obtaining additional debt and instead focus on repaying existing dues. While in many ways this is good as it is a strong step to reducing consumer debt levels as a whole at the same time the reduced level of cash flow means weaker commercial strength as consumers purchase less – particularly in the area of luxury goods and other non-necessities.

While a number of economists feel that the economic shift in the property market should shift following the first quarter of next year as the market settles into a healthy equilibrium the regulations being created by many lending institutions may still limit the availability of funding to many. This will be particularly true if new regulations placing the burden of lending more on lending institutions themselves successfully take effect and thus force many institutions to not risk funding many individuals that would otherwise have received funding in the past.

Many home owners have gone on edge as of late following news from the Financial Services Authority (FSA) that they are looking at increasing regulations placed on home purchases. The moves, should the be enacted, would not only impose affordability tests for all mortgage applications but also increase the responsibility put on lending institutions – effectively making them ultimately responsible for all payments outstanding on loans they issue – and provide additional protection for many vulnerable customers.

The move, while seen as a positive step by some in the real estate industry in order to safeguard the economy against further recession, is being seen as a major blow by many experts such as the Council of Mortgage Lenders (CML). Citing the fact that roughly 3.8 million mortgages would have been denied from 2005 till now should the FSA’s proposed regulations have been in place, the CML is avidly opposed to any further regulation that would add strain to the already weakened economic market.

Many first-time buyers in particular are worried about what this might mean for them in their own quest to seek affordable housing. Having faced numerous issues in the past related to obtaining a good mortgage for any home purchase it is feared that further regulations could severely limit their options.

Even those wishing to obtain a second mortgage for further purchasing or a re-mortgage to eliminate some of their existing debt are worried over what increasing regulations could mean to them. At a time when lending for re-mortgages and other financing is at an all-time low any further regulations could deal a serious blow to the cash flows present in some areas and have drastic economic impacts upon many environments.

Latest restrictions set out by Lloyds places many buy-to-let investors ill at ease, with new mortgages being issued only for individuals with less than £2 million worth of lending currently being used or portfolios with less than three estates. While Lloyds claims that this move will affect relatively few individuals many people feel that, due to the relatively limited market for buy-to-let mortgages in today’s lending society along with various other economic factors, this decision may affect many people throughout the mortgage sector as a whole.

With restrictions on typical tracker and fixed-rate mortgages at an all-time high many feel that this latest move by Lloyds will further limit the overall effort of many individuals to purchase investments for use around the country. Additionally given the growing demand of many individuals and families alike to rent rather than own property this can potentially have a major impact upon the overall lettings market with demand far exceeding the overall supply of locations and thus drive up the market value of rentals – much as was seen earlier in the year with the supply and demand imbalance within the general property market.

Nevertheless lending institutions such as Lloyds are lauded by many experts for taking stronger restrictive moves such as this in recent months as well. They feel that, should lending become too out-of-hand and institutions dedicate too excessive amounts of money in speculative markets this could have a strong weakening effect on the overall recovery effort. Additionally should another recession take hold a more lenient attitude towards lending could result in major losses for both consumers and lending institutions alike, severely damaging the overall market conditions as a whole.

As Britain as a whole moves closer towards what is being seen as a ‘mortgage famine’ by many experts prospective and current home owners alike are finding their concerns over a solvent future growing substantially. This is particularly the case in recent months as mortgage approvals for home purchases for the month of August dropped to what is reportedly a 16-month low of 31,767. House prices at the same time due to a derth of mortgage availability dropped to a country-wide relative low of roughly £166,000 – minor gains in some respects on an overall basis though showing a significantly lower pace than seen previously in the year.

As the lending famine strikes home on multiple fronts first-time buyers in particular are finding themselves edged further and further out of the market, being forced to have substantial deposits (generally in the range of 25% of the home’s equity) in order to take full advantage of the low interest rates still supported by the central banks. Nevertheless as lender speculation that this interest rate will not last for long fixed-rate mortgages are becoming less and less desirable, especially for purchasers looking to buy homes in areas known for fluctuating home prices that may suffer due to dropping home values in later months even if they do somehow find a way to afford a home at this stage.

Current speculations over the existing ‘mortgage famine’ place expectations for a recovery nowhere in the next 12 months, with banks and other lending institutions tending to take a more conservative approach in order to preserve their current financial standing and curb any negative backlashes a recurring economic downturn may cause. Nevertheless hopes are still high amongst many experts who feel that this change will actually work out for the best in the long run as individuals as well shift their focus away from incurring additional debt through a home purchase and instead work to pay off existing debt, generating a more stable financial foundation for future purchases while the housing market cools to more reasonable levels.

Figures released recently from the British Bankers’ Association last Thursday indicate a new low in  terms of mortgage approvals on the market, with a mere 31,767 mortgages for buying a property finalized across the country. These latest figures put mortgage lending for property purchases at the lowest level seen since April 2009, with August being the third consecutive month in which approvals have fallen regardless of the fact that the summer months are usually seen as the most active time of year for property purchases.

On average lending institutions could have been expected to be approving approximately 36,000 home loans each month, a level generally seen to be in line with the declining market in many ways as consumer interest in the property market falls for a variety of reasons. The latest low, however, is a strong sign against recovery for a number of people – particularly first-time buyers and those requiring bad credit mortgages. This is due to the fact that, despite the continued low interest rates offered on all homes as set by the central Bank of England, lending regulations are proving tighter and tighter and as such have made it significantly more difficult to obtain funding.

Regardless some experts feel that this decline as of late is not unhealthy but in fact a sign that things are beginning to finally balance out. While earlier this year a large boom was seen in the property market thanks to a strong imbalance of supply and demand now things have shifted and although the result may not look too good statistically in the short-run it is generally considered to be a positive trend in the long-run.

According to the London Central Portfolio (LCP) both the London property market and in many ways the UK property market as a whole may see some trouble in the near future due to economic difficulties. In fact, many feel that the overall recovery is dependent upon specific economic triggers that, though they not come, could result in yet another major downturn that would damage the market as a whole once more in a variety of ways.

One of the key figures, reported by the LCP, is the need for mortgage lenders to become more flexible with their lending policies. This has been seen by many to be the primary limiting factor in many recovery factors beyond simply those relating to purchasers requiring bad-credit mortgages for a purchase. Both tracker and fixed-rate mortgages based upon the continued low mortgage rates have proven to be difficult to obtain for a number of individuals lacking substantial funds to utilize as down-payments for purchases.

The economic recovery is also seen as a major factor in sustainable recovery, not from a matter of pure financial concerns but of overall job security. One primary limiting factor as seen as one of the major causes in preventing a large number of potential purchasers from securing a home or even pursuing a mortgage is the lack of job security currently present in most industries. This has caused the majority of prospective buyers that do not feel secure in their current job position to seek to differ their purchase until a later date at which point they would feel more capable of supporting a purchase without worrying over whether or not they would be capable of making payments on a regular basis.

A recent poll of consumers throughout the nation recently concluded that the majority of the population is showing less and less concern over the overall availability of mortgages on the market, following a trend of declining home sales in various areas across the nation.

The recent decline is seen to be attributed less to the actual mortgage offering sector and more to the various factors affecting the housing market – particularly for first-time buyers. Despite the fact that mortgage rates have remained relatively low, for instance, house price increases coupled with continued economic stability and lack of job security have been primary de-motivating factors for both individuals looking to purchase a home of their own as well as lending institutions being willing to reduce the overall restrictions they have placed on mortgages themselves.

This has led to even re-mortgages being less and less common today, as more people currently owning their own property have turned farther from incurring additional debt and looked more towards paying off existing accrued funds owed to various lending institutions. This fact is substantiated by recent statistics that Britons throughout the country have shown a record low percentage of funds saved this year combined with substantially lower purchasing debt across the board with credit cards as well.

Many experts feel that the current trend leaning against mortgage pursuit will clear up once the economic situation as a whole has had a chance to quiet down and job expectations remain more stable. Whether that will occur in the near future, on the other hand, is still up in the air as the declining real estate market is seen to be a negative indicator of things to come.

As many home owners are painfully aware of house prices are on the fall, with an anticipated 10% drop in overall home value anticipated through the end of 2010 and continued into the first part of 2011. Most likely this will come in the form of a 3% drop over the next few months with a 5% drop during the winter months of early 2011.

At the same time what many current home owners are not aware of is that the declining house prices are one minor issue another major concern is the fact that mortgage lending regulations are becoming more and more strict in order to protecting lending institutions from financial strife should they be placed in difficult positions. This has created the best deals only being available to buyers looking at basic fixed-rate mortgages becoming available with a minimum of a 25% down payment, with anything less than that generally a triggering an APR increase of at least 1% form most lenders. Worse, this is expected to stay this high regardless of what the central banks are willing to set the standard interest rate at as lending companies grow increasingly concerned over their own financial security and solvency.

Another issue that many home owners are unaware of is that the lowering house prices may have a drastic impact upon them as well. A home purchased right now with a 25% down payment against the home’s equity may be enough for a decent loan in the near future, however should house prices drop by the anticipated 10% this would cause the equity value to only be worth approximately 17% – well below the threshold necessary for ensuring favourable rates. This is a major concern for residential and commercial mortgage holders alike as it could easily trigger widespread financial strife should loan holders be suddenly forced to make higher payments each month simply due to falling house prices.