Tackling the issue in this week’s Market Watch are:

Mike Fitzgerald, sales director of the EMBA Group

Martin Wade, director at Your Mortgage Decisions

Duncan Crocker, managing director of Legal & General Network

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Mike Fitzgerald, sales director of the Emba Group

The recent claims by lenders that a lack of demand ,not funding is stalling the mortgage market is causing many brokers and commentators to wonder just what is the real reason for the lack of growth in our industry.

When the sub-prime storm hit the UK, it certainly sent shock waves through the market and, with falling house prices, it seemed like the last thing a client wanted was a mortgage. Demand fell off straight away and many lenders either went out of business or greatly reduced their product offering.

Once the dust had settled, lenders started to look at ways of attracting new business and gradually the amount of products on offer increased.

However, lenders then started to price higher loan-to-value mortgages at a much higher rate.

The lack of mortgages available at higher LTVs has slowly improved and we now have a few mortgages at 95%. The rates are quite high and clients seem disappointed when we offer them at rate at 6% when their perception of rates is that they are all low at the moment.

This has caused many clients to delay their home purchase and they are now renting until the situation improves. Unemployment and the fear of losing one’s job is also causing the market to stall.

A few lenders have also started to reduce or even abolish their arrangement fees and this is now starting to attract more mortgage business.

Lenders must reduce rates on higher LTV products and get back their willingness to lend.

Some lenders are trying very hard to obtain business and we need this to spread throughout the lending community. If better funding is found, we will see demand improve and buyers will be able to achieve their dream of owning their home.

Martin Wade, director at Your Mortgage Decisions

Who are they trying to kid?

We all agree that we are operating in a very different market to the one of a few years ago. Self cert, sub prime and 100%+ LTV are a thing of the past and a more sustainable approach, if somewhat restrictive, to lending has taken hold.

Lenders have learned not to pile it high and sell it cheap, but to cherry pick their deals. It reminds me of the old phrase about a banker being a person who will lend you their umbrella when the sun is out, but ask for it back when it is raining.

To an extent this has actually assisted us in the intermediary world, as it has made securing a mortgage direct from a lender by ‘the man on the Clapham Omnibus’ an almost unobtainable event.

Those of us with the right attitude, ability and aptitude have turned this environment to our favour with good advice literally being worth every penny.

However, for the lenders to suggest that the lack of products and low volume lending is as a result of a lack of demand quite frankly beggars belief.

This is an environment purely of their creation. Mortgagees can be forgiven for being reticent in looking to improve their financial situation, as they have read nothing else other than how hard it is to remortgage these days.

We do not expect to see a return to the days of 125% LTV, but a realistic approach to criteria and affordability would lead to a surge in applications once the fear of a decline has been overcome.

Create the products guys and the demand shall surely follow; there is plenty of business out there.

Duncan Crocker, managing director of Legal & General Network

I can imagine that sort of remark being somewhat provocative to many, but it is an interesting question.

We started this downturn more than three years ago and, throughout most of that period, it has clearly been a lack of funding that has contributed to the downward spiral.

Back then, it was obvious that a mass retrenchment or a ‘run to the hills’ by lenders would have devastating consequences, but you could also understand why this was happening and how hard it was to stop.

Here we are now, and things have changed a lot. New lending for house purchase and remortgage is significantly down, and buy to let is picking up nicely, albeit after a drop of some 80% or so. So, why no obvious pick up in activity?

We commissioned research recently and the findings were:

– less people will remortgage in 2011 compared with 2010
– more respondents said they were less likely to move
– those most likely to move are 25 to 36-years-old and renting
– those wanting to move cited wanting a larger house as the primary reason

These findings tells us a lot, however, of those that had no plans to move. The top two reasons were:

– worried I won’t find a lender that will lend to me
– can’t afford to

So, there is some lack of demand but also supply, and this feels right to me.

That means the fix has to come from all parties working closely together to make sensible new products available on more obtainable terms; however, we do not want inappropriate risk back into the system.

Confidence will ultimately help the purchase market back and a little base rate fear and movement will incentivise many to re-mortgage.

Until that point, a lack of demand from some parts and a lack of supply to others will see that the market overall remains flat.