Many experts are predicting a return to the values of our forefathers, where individuals saved up and paid cash for their homes, rather than taking out home mortgages. While this might seem strange in the modern day, it is certainly how things were done in the early days of civilization and continues to be a popular method of purchasing homes well into the modern day, involving no home mortgages whatsoever. With so many individuals having such a hard time getting a home mortgage, they may have no other choice but to adopt this fashion of achieving a home mortgage.

With this difficulty in obtaining a home mortgage, many individuals who do not have the highest level of credit are unable to find a loan and buy a house. With these individuals having so much difficulty, it is easy to see that the credit crisis has begun to restrict the real estate market and the home mortgage business in a reaction to the oversaturation of the market and overvaluation of homes.

Until the market becomes more stable, home mortgages will continue to be difficult to obtain for those who do not have top-notch credit. By improving the credit of these individuals, home mortgages could again be issued to those who are able to provide stable work history and a strong credit ranking. Unless these criteria are met, it is very likely that the home mortgage will remain out of your grasp.

Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors, said, “Mortgage activity appears to be stabilising although the paltry level of activity is not supportive of a near-term pick-up in house prices.

“Few crumbs of comfort can be taken from recent signs that mortgage activity may have finally found a floor amid a backdrop of a stalling economy and expected rises in unemployment.”

The Council of Mortgage Lenders said: “The shortage of mortgage funding has limited activity across the mortgage market including the buy-to-let sector, which has a significant number of lenders that rely on wholesale funding.”

Jonathan Cornell, managing director at Hamptons International Mortgages. stated, ‘Holding base rate, while offering relief from a rate increase, will do little to ease borrowers’ pain. The average monthly mortgage repayment has been gradually increasing and with increases in energy and food costs in July, borrowers will have to stretch themselves even further. There seems to be no happy outcome at the present time.’

Ray Boulger of John Charcol commented, “Swap rates having fallen substantially over the last month, with two-year swaps a whole percentage point down from their recent peak. This has allowed lenders to make sizeable cuts in the cost of fixed-rate mortgages but it is still too soon to buy a fixed rate as rates are expected to fall further.”

Stephen Gifford, Grant Thornton’s chief economist, said: “Despite the global downturn flattening the growth of personal debt and UK GDP over the past few quarters, debt levels continue to grow at a faster rate than the income the UK generates.

“Although there is no cause for panic as personal debt is well covered by the UK housing stock, the figures clearly illustrate the continuing problem of growing personal debt levels in the UK.”

‘Who will want to commit to a property purchase now when it is probable that by waiting a few months stamp duty costs, possibly running into tens of thousands of pounds, can be avoided?’ said Ray Boulger, senior technical manager at John Charcol.

‘The government’s policy of leaking policy initiatives like this is not clever. They have been considering action on stamp duty for some time and should now announce a definite policy in the very near future. With the chancellor’s confirmation that he is considering a temporary suspension of stamp duty, the already very low number of transactions in the housing market, approximately 60% down on last year, will diminish further until he sets out his proposals.”

Ray Boulger at broker John Charcol said: “Northern Rock previously tried to discourage existing borrowers from staying on its books by keeping its rates high. However, those borrowers coming to the end of a fixed-rate who still have more than 90 per cent of their property value to repay have found it near-impossible to get deals elsewhere.

“This means that the Rock has been left with a lot of high-risk borrowers. These new rates are aimed at attracting low-risk borrowers with large deposits, in order to achieve a better balance between high and low risk custom.”

“Normally you would encourage borrowers to shop around at the end of their deal and avoid going on to the SVR. But that’s not so easy now,” said Louise Cuming, head of mortgages at moneysupermarket.com. “Lenders have changed their criteria so you can’t borrow at the same multiples as before, so borrowers need to consider SVRs even if they’re not effectively trapped into them.”

“Whenever it comes to remortgaging, compare the cost of the fixed rate, including any fees, against what you would pay with an SVR over the same length of time,” advised John Postlethwaite, mortgage expert at Punter Southall Financial Management in Edinburgh.

“Now is a good time to buy because, if properties bottom out as I think they will by the end of this year, sellers might not be so willing to drop their prices next year. If you are prepared to take a five-year view, there is no doubt there are some real bargains around,” says Ray Boulger of John Charcol. ‘There is always a risk, too, that the valuer will be cautious and come in at below the agreed price. Some lenders insist valuations on new flats are done by their in-house valuers where they have more control. With older properties there shouldn’t be a problem.”

‘If you want to buy a new-build flat on a buy-to-let mortgage you could have some difficulties because the lenders are wary of these properties. But if it is an older property and just classed as a second home, there shouldn’t be any problems,’ says Ray Boulger of mortgage broker John Charcol. Birmingham Midshires and Bank of Scotland will still lend up to 75% loan-to-value on new flats but others are more cautious and you may need a deposit of up to 35%,’ added Boulger.

Louise Cuming, head of mortgages at Moneysupermarket.com, says: “My argument against long-term fixed rates has never really been about rates, in the sense that none of us have a crystal ball and know what we might be paying several years from now. It’s more down to the fact that redemption penalties on long-term deals are fixed for long periods of time, sometimes 10 years and even longer. This meant that if you were coming out of a relationship, for instance, and needed to sell the property you were faced with a large cost when repaying the mortgage.”

“That said, Manchester Building Society charges 6.25 per cent for 30 years but you are only tied on for 120 months, so the straightjacket is not as tight as it was. Besides, it is getting to the point where some arrangement fees on mortgages are running to thousands of pounds, which are then added to the loan. So of you pay off the mortgage early, even if there is no penalty you are still paying for the cost of the arrangement fee in the final bill. So I’m less convinced by my original argument than I used to be.”