The study showed that, of the lenders that had reported a rise in shortfalls, all said the scenario was occurring more frequently compared to a year ago, with 56 per cent stating the principal factor behind this was cooling house prices. 44 per cent indicated high loan-to-values were the reason for the increase.
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A cross-section of 19 lenders was questioned, including banks, building societies and specialist prime and non-conforming lenders.
Paul Walshe, head of lender services at Moore & Blatch, said: “Shortfalls were a huge issue in the 90s and they still are, even against the backdrop of rising house prices. This is the cumulative affect of charges being added to the loan. The increase in house prices has lulled people into a false sense of security and the recent cooling means buyers are left vulnerable.”
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Christopher Dean, press officer for the Council of Mortgage Lenders, said: “It is not a problem we have come across. I doubt it would have to do with cooling house prices, as we are predicting an increase of 7 per cent this year. Shortfalls relate to the way the property is sold. If a quick sale is needed at auction, it can lead to a shortfall. Lenders should keep this on the radar, but not panic about it.”
