Mortgage Constraints: Implications For Uk Housing Markets

The shift in regulated financial markets and global economies induced by globalisation has had significant impacts on housing in many cities of the world. This feat was largely assisted by de-regulation within the banking sector which affected manoeuvrings in the housing finance system, making mortgage finance readily obtainable through the end of credit rationing. As a result, the flow of funds into the property sector via liberalised lending policies and subsequent competition within the mortgage market has simultaneously introduced increased demand for housing products as housing wealth has become more liquid. Importantly, the advent of finance streams resulted in the demutualisation of financial institutions, resulting in improved mortgage liquidity and an increase in gearing rates in the marketplace, leaving mortgage rates dependent on interest rates. This dependency heightened the sensitivity of the housing market to macroeconomic fluctuations on debt and consumption (Kasparova and White, 2001) and introduced an era of destabilisation. Furthermore, it could be argued that this has served as an underlying driver of house price inflation. The demise of global money markets post-financial crisis has curtailed inter-bank lending and borrowing creating a tepid mortgage lending environment. As banks strive to rebuild their balance sheets the contraction in mortgage lending has had a profound impact upon access to the property market, most notably within the first-time buyer cohort. The constrained availability of mortgage finance and subsequent reduction of loan-to-value ratios has manufactured an impasse in housing market activity as mortgage providers with limited credit supply have adopted an overtly conservative approach to their lending capacity and strategy. This paper explores the current position relating to the availability of mortgage finance within Northern Ireland. The research will examine the range of mortgage products currently available, the criteria being applied by lending institutions to prospective purchasers. The dynamics of the mortgage market will also be explored, including an examination of long run trends relating to mortgage approval rates and relative affordability indicators. Comparatives between the Northern Ireland market and the wider UK will be drawn.