Rising costs on wholesale money markets are throttling buy to let and HMO mortgage lending, according to the latest borrowing figures.
The availability of loans is shrinking month by month, with lenders running out of money mainly because of the Eurozone debt crisis.
Mortgage approvals for March plunged to 43,450, the lowest level for more than a year, claim surveyors e.surv.
The figure is 11% down on mortgage approvals for February and 7% below May last year.
Bridging lender West One’s Mark Abrahams explained the lack of mortgages is a trend and not a one-off event.
“Lenders have reported a fall in mortgage credit for the first time since spring 2010, due mainly to the increasing funding costs, which looks set to last well into the summer. High street banks have reported an increase in demand for mortgages this year, but have admitted they won’t be able to cater for it,” he said.
“Buy to let lending will fall with loans on cheap properties without kitchens or bathrooms hit hardest despite sky high demand. Brokers should take heart that this should fuel the bridging sector: it will encourage more investors to use bridging loans to finance projects.
“The ratio of residential lending to commercial lending has been increasing steadily year on year in favour of residential, reflecting the increasing demand from buy to let investors for bridging finance. Some 84% of all loans in 2011 were to residential investors, compared to 77% in 2010. These figures suggest that is set to increase again this year.”
First time buyers and borrowers with low deposits are suffering most from mortgages drying up.
Only 10,428 loans approvals were agreed on property worth up to £125,000 in March, down from 12,247 in February, while just 4,432 loans went to buyers with a deposit of 15% or less, compared to 5,829 in February.