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The Halifax has revised its price predictions for the year. It expects house prices to fall further over the course of 2008. Another leading lender Nationwide gave similar indications earlier this month after declaring that house prices had fallen for five months in a row.

Analysts state that the ‘weaker-than-expected’ data from the two agencies would raise hopes of the Bank of England (BoE) cutting interest rates by minimum 25 basis points in the near future.

However, since the lack of liquidity in the current money market is making it costlier for banks to borrow, any rate cut benefit may not be passed on to mortgage holders, market observers say. According to the chief economist of the Royal Institution of Chartered Surveyors, Simon Rubinsohn, the sharp fall in the Halifax house price index in March indicates the increasing pressure on the residential market even as lenders continue ‘to scale back their activity in the market.’

He added: “Loan-to-value ratios are getting lowered at the same point as borrowing rates are being increased, putting additional pressure on first-time buyers having to find ever larger deposits.”

Shrinking mortgages continues to be a worry. Analysis and data by various market experts and institutions like the CML have brought to fore the quick contraction witnessed in the mortgage market – an outcome of problems experienced in the global financial markets. What exactly is the scenario prevailing in the property market? Here are some pointers:

• An acute credit crunch has considerably restricted and reduced the ability of building societies and banks since last autumn to lend money to customers.
• As a cascading effect, this has resulted in lenders shrinking the range and extent of mortgages on offer. They have been demanding much higher deposit amounts from harried borrowers, and simultaneously raising the interest rates on certain deals.
• The CML figures revealed that lending to first-time buyers fell to its lowest level in the three months to February since early 1975.
• The number of mortgages that were granted in February to various groups of home buyers was at its lowest level since 1992.
• Loans for purchasing a home, rather than for individuals merely expanding their mortgages to part-finance other spending or changing deals, now make up just 30 per cent of all mortgage lending; this is the lowest level on record.

The recent announcement by HSBC allowing homeowners to keep their fixed-rate deals for a further two years, has resulted in a surge of interest in mortgage applications. There are a number of key points to consider when applying for a mortgage:

1. Research all possible mortgage deals (try using an online comparison tool)
2. Calculate how much you will be allowed to borrow
3. Decide if you will be getting a broker (in the case of HSBC’s offer, you will need to go directly through the lender to apply for a mortgage)
4. Fill in the application forms quickly so you are not affected by the interest rates rise

The toughest part of the mortgage application process is the waiting for the results. This process can take up to six weeks. In the meantime, you can start planning how you will be decorating your house and choosing what to plant in your garden.

How much should borrow to buy a home post-split? This is a very crucial question. If you have already sold your family home and are now a cash buyer, you can afford to be tough and rigid when negotiating a price. This is because you are in a strong position.

However, it can be unnerving if you are needed to secure a sizable mortgage on your own to own a property. Financial advisers offer a word of caution in this regard. According to Sam Butler of Cirencester based Butler Sherborn, divorcees should not ideally over-stretch themselves.

In fact, one should be prepared ‘to cut one’s cloth and live in something, which might appear like a compromise,’ is the practical piece of advice. Psychologically, it can take divorcees some time to accept and realise that they are not going to have a spacious and luxurious house they used to have while married, owing to changed circumstances.

Experts wouldn’t advise divorcees taking out a huge mortgage that is going to put them under more financial stress.

Trying to look into the no-deposit & low-deposit deals, if any, on offer for home buyers can be very difficult. Just a few weeks ago you could have found at least half a dozen firms providing mortgages which let prospective home buyers borrow up to 125 per cent of a particular property’s value.

Now, there’s very little available above 95 per cent loan-to-value. Last week only, Scottish Widows Bank opted to pull its 100 per cent deal - aimed at accountants and solicitors. The most it will now prefer to lend professionals is 95 per cent. As market analysts point out, lenders regard this class of borrowers to be ‘higher risk’ than borrowers with sizeable equity or deposits in their homes, especially if house prices fall, which would add to the risk of negative equity.

A few lenders like Abbey still offer 100 per cent deals, but the rates on these are as much as 2 per cent higher than the equivalent lower ‘loan-to-value’ deals. Abbey is probably the only lender, which is still offering 100 per cent loans - with no conditions to the creditworthy. You can select either a fixed rate or a tracker. However, its deals can be pricey; the two-year tracker rate is BoE (Bank of England) base plus 2.99 per cent - a current pay rate of 8.24 per cent.

‘Deal or no deal- who will give you a home loan?’ is the question that’s in front of prospective property buyers.

Taking stock of the situation, the latest news story in ‘The Guardian’ mentions

It’s a case of blink & you will miss them as building societies and banks are frantically pulling their best mortgage deals off the shelves and even shutting up shop completely in some cases.

This frenzied activity, as the news report points out, has left prospective home buyers and those who are keen to switch to another attractive deal with little option but to wait and watch in dismay. They have been made to scramble for their mortgages before they’re whipped away by the lenders.

Among those particularly hit by this tightening of purse strings are individuals with any hint of black mark on their financial records, the report adds. Things are moving so rapidly that it’s quite possible that yesterday’s best-buy will be history tomorrow. As a result, mortgage tables and trackers may soon ‘go out of date’, it continues, and then asks on a rather pensive note: “Is anyone still out there offering decent mortgage deals?”

After getting literally hit by a flood of applications for its fixed rate mortgage deals, First Direct decided to withdraw mortgage lending from its bouquet of services for its new customers.

The surge in applications was owing to the increased interest from people in their mortgage deals in response to the actions of its competitor banks. Not being able to cope with these unprecedented circumstances, the firm was left with no option but to withdraw its mortgage offers. According to the Chief Executive Chris Pilling, it was becoming operationally unfeasible to deal with the large number of applications from non-customers. So it decided to stop all of its mortgages to new homeowners instead of increasing interest rates for non-customers on a temporary basis, maybe for a few weeks, to clear off the backlog and function at a desirable pace.

While the operational functioning of First Direct does not rely on wholesale funding as such, it has taken appropriate measures to ascertain that it caters to all levels of applications received. The company intends to offer similar mortgage deals in keeping with the frequent fluctuations in the money market.

There’s good news for first time property buyers in the UK. April will witness plenty of availability of housing in the country for new investors. The eased-up loan norms will further encourage them.Thanks to the new proposal recently announced by the UK Government that all first time property buyers in the country are to be offered two equity loans, more first time buyers will now be inclined towards making an investment in the housing market.

This initiative further paves the way for the first time buyers to go ahead and explore the enticing opportunity of owning a home in the UK and in turn, get their purchasing power boosted by up to 50 per cent. They can buy a home of their choice provided they’re able to secure a good mortgage deal.

The buying procedure has been comparatively made simpler to the Open Market Home Buy (OMHB) scheme. Caroline Flint, the UK Housing Minister, acknowledges that the new, eased loan norms endeavour to offer flexibility and affordability to first time buyer. Besides, the buyer or the resident need not pay the stamp duty until he or she has acquired 80 per cent of the equity in the property.

First Direct has decided to suspend mortgage lending to new customers after being inundated by applications following moves by its rival banks to pull similar mortgage deals owing to volatile conditions in the money markets. The bank - part of the UK’s biggest bank, HSBC, on April 1st made a decision to withdraw all its mortgages to any of the homeowners who were not its existing customers after it got almost five times the normal level of loan applications.

First Direct does not depend on wholesale funding but it stated it had taken the measures for ensuring it could deal with the deluge of applications it had received. The chief executive of First Direct, Chris Pilling, stated: “The flood of interest in our mortgages means we are taking longer than we would like for handling applications, especially from non-customers.”

He added: “Rather than opting to increase interest rates suddenly and dramatically to wean away new applications, we have now decided to withdraw from offering mortgages to non-customers temporarily until we have cleared the backlog.”

He explained HSBC had stepped in for offering mortgages to non-customers. First Direct, he assured, will come back to the market once the backlog is cleared. This could take a few weeks, he said, refusing to set any timeline.

Cheltenham & Gloucester, part of Lloyds TSB, and the UK’s second largest mortgage lender, Nationwide, both took steps last week to avoid being inundated by applications. The two lenders increased their rates on some products to make them ‘less attractive’.

In fact, lenders that depend more heavily on the money markets for funding new mortgages unexpectedly pulled two-year fixed rate mortgage deals and have opted to hike rates owing to the increasing cost of wholesale funding.

As a result, millions of home loan borrowers in the UK now face the prospect of higher interest rates as banks now choose to pass on higher wholesale funding costs.

Reflecting the market trend, First Direct has been swamped by applications since it began offering its two-year fixed rate mortgage deals pegged at 4.95 per cent – considered to be one of the most competitive deals in the market. Applications to First Direct have increased in recent weeks. A market analyst mentioned: “This is one way of limiting applications. Some building societies have been stopping applications geographically whereas others have been opting to restrict them by asking borrowers to put down a certain deposit.”