Nervous banks block first time buyers

As the credit crunch bites and lenders tighten their criteria for making loans, getting a mortgage is harder than it has been for several years.

The collapse of Northern Rock and the US subprime debacle has caused a crisis of confidence in the banking industry. Major banks have been reluctant to lend even to each other.

But there are signs the situation may be easing slightly. Overall mortgage lending rose 8% to £26 billion on the previous month, with borrowers increasingly favouring fixed-rate deals.

CML boss Michael Coogan said: "There has been a resurgence of fixedrate lending as borrowers are seeking certainty. This trend is likely to continue as the anticipation of future Bank base rate cuts has diminished."

Fixed rate deals were chosen 59% of the time in April, up from 54% in March. Coogan predicts that the choice of mortgages on offer will remain low for several months at least.

"While tighter criteria make it more difficult for some borrowers to obtain a mortgage, they also reduce risk in a slower housing market," he said.

The CML expects that UK house prices will drop 7% this year - a less drastic forecast than many others in the field.

The average deposit first-time buyers put down on their new houses rose to a three-year high of 13%.

The ratio that buyers can borrow against their income increased slightly to 3.3 times salary.