Rates up, lending down. A familiar tale....

This week has seen a big rise in the cost of medium to long term fixed rate mortgages (as reported by various sites including the BBC).

Driven by a leap in the cost of interbank lending, Moneyfacts reports that the average two year fixed rate deal has risen by 0.16% and the average five year fixed deal by 0.21%.

I actually know this to be true as my existing lender has been offering me a new deal on my loan at 4.69% fixed for five years. When I spoke to them this week I was informed that the rate had risen by a staggering 0.8% to 5.49% (an additional 4% over five years). Thankfully I had "reserved" my previous product and so I am able to lock-in at the lower level.

The CML also report that mortgage lending in May fell back from April by 2%, a staggering 58% decline on last May.

Whilst surveyors and economists are united in believing that the price bottom of the housing market is here or imminent the cost and availability of borrowing remains a serious and critical issue to the recovery of the market as a whole. Figures showing a continued decline in lending and the cost of loans rising sharply are not good signs.

Green shoots....or not?

Amongst all the anecdotal evidence that green shoots are starting to reappear in the property market, continued statistics seem to suggest otherwise.

Research from the price comparison website Moneyfacts has found that there are only 102 mortgage products available to borrowers with a 10% deposit compared to over 3,100 in January 2008 - a reduction of 97%. The cost of borrowing has also risen - in January 2008 the average rate for a 90% loan was 1.2% over the Bank of England base rate whereas today it is at a staggering 5.73% over Base.

A further problem is that borrowers are also finding it extremely difficult to be agreed on these 90% deals. Lenders are only interested in A1 clients who have impeccable credit ratings and who fit a lender's criteria perfectly.

These and other factors have led to the Council of Mortgage Lenders (CML) reporting a 9% fall in mortgage lending in April and a 60% fall from the same time last year.

Whilst estate agents and surveyors believe the property market has neared stabilisation this lack of access to funds for all but the best quality and low "loan to value" borrowers will continue to hamper any quick recovery in the housing market.