Since the credit crunch, the mortgage market has been left suffering from a great freeze after more and more lenders became increasingly reluctant to lend.
As a result, a number of mortgage products such as the 100 per cent mortgage became extinct. First time buyers had no choice other than turning to the bank of mum and dad, where the financial restraint of mortgage repayments were also being felt. Additinally some returned to their parents'
home, so they could save up for their own property
This led to a significant impact on the property market, as more people failed to get a mortgage.
To encourage sales, house prices plummeted consistently throughout the year, while the Bank of England reduced its base rate. Yet despite lenders passing on the base rate, the numbers of
mortgage approvals were still low.
However, over 12 months into the economic crisis, we can now see signs of recovery.
Recovery in sight
According to figures from the British Bankers' Association (BBA), the number of mortgage approvals increased to its highest level in 15 months, with its stats marking a 65 per cent increase compared to the same time last year.
David Dooks the statistics director of BBA, said: "The number of home
loans approved by banks was recovering from the very low level last November and so far this year gross mortgage lending has topped £50 billion.
This is in sharp contrast to lending by the rest of the market, which is still contracting. People are showing little appetite for unsecured borrowing."
The increase in mortgage approvals could be down to the reductions in the interest rates of lenders due to the ongoing reductions in the Bank of England's base rate.
And to make things even better, lenders are still expected to reduce their rates even further.
Providers to reduce mortgage rates
Nationwide's recent announcement that the rates on some of its tracker and fixed mortgages will be reduced up to 0.5 per cent is expected to trigger off further reductions by other lenders.
Phil Perry, the director of Ark Financial Planning, said: "Nationwide are quite a market leader. I would tend to say I would expect the major lenders to follow suit."
Furthermore, according to a number of mortgage brokers, the Bank of England's recent decision to pump a further £50 billion onto the economy could mean that fixed-rate deals would become cheaper within the coming weeks.
Ray Boulger a figure from a price comparison website advised those opting to remortgage their property to wait a while longer before deciding on which remortgage they would like.
He said: "If you are remortgaging and want the security of a fixed-rate deal, there would be no harm in waiting to see where the market goes."
However, he added: "There is a premium on fixed-rate deals at the moment because the market predicts that rates will rise. However, if the base rate remains low for at least the next year, as many economists are predicting, it will be worthwhile opting for a cheaper tracker."
And as more providers begin to reduce their mortgage rates, according to Amit Kara, a UK economist at UBS, the number of mortgage approvals will, "continue to improve over the next coming months."
