Mortgage rationing in full swing as people turn to renting

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In SPITE of recent hints that the economic crisis might be improving, it is still not easy to obtain a mortgage.

Over the past five years the number of mortgages available to first-time buyers has dropped by 75 per cent.

There are more than 200 different mortgages available to people looking to borrow 90 per cent of their home’s value, down from more than 900 in the summer of 2007 before the credit crunch struck.

The value of mortgage lending has fallen by two thirds from a record high of £34 billion in June 2007 to just £13 billion in July 2012 which in turn means the number of house sales has fallen dramatically.

Many lenders boast of deals that offer record low mortgage rates.

Some lenders have launched five-year fixed rates starting at 2.95 per cent, but sceptics question how many consumers are actually getting approved for these bargain-basement deals.

Interest rates are low, but mortgage rationing is still in full swing meaning that obtaining a home loan is more challenging now than it has been for years.

Which in turn means that many people are opting to remain tenants and to rent for longer.

This is particularly true in the 16-34 year old bracket.

In 1999 they made up 13 per cent of all people renting. Today that has jumped to 31 per cent. Renters put a smaller percentage of their take-home income towards housing.

It has been calculated that 20-28 per cent of annual income is earmarked for rent, against 27-33 per cent on a mortgage.

On average, in Angus a one-bedroom property can be rented for between £375 and £425 a month, rising up to £1,000 a month for a four-bedroom home.

Country properties are always popular with renters and in Angus a significant number of landlords are farmers.

Many people despair of ever owning their home and a significant number of these have accepted that renting will be their way of life.

It has its upside – they have more disposable income if they pay rent rather than a mortgage, they don’t have to worry about repairs and maintenance and they have greater rights than ever before.

Gone, at least for the foreseeable future, are the days when your doormat was littered with junk mail offering to throw money at you at very cheap rates.

But if you have set your heart on buying a home of your own, it should be possible if you have a large enough deposit, a good credit history, a secure employment record and informed financial advice.