A new lender, Precise Mortgages, entered the contractor mortgage market yesterday. The group will lend funds to investment landlords providing they have at least 25% to put down as a deposit.

The company, which is backed by US venture capitalists, will offer contractor mortgages through intermediaries such as L&G Mortgage Club and Mortgage Next.

The chief executive of Precise Mortgages, Ian Lonergan, said that a significant mortgage shortfall has taken place over the last couple of years as some lenders have pulled out of the mortgage market or focused on lending only to borrowers with a very low credit risk.

He believes there is now a strong demand for new lenders to enter the UK market place.

The group has 3 different deals on offer; one of which is a two-year tracker loan with a starting rate of 5.79%.

Another group to enter the market place yesterday was Aldermore. They will provide discounted and fixed rate residential loans as well as buy-to-let mortgages.

The buy-to-let market started to improve earlier this year with new players such as the Bank of China entering the sector.

The Mortgage Works launched 7 new products for the buy-to-let market earlier this month. There are now a total of 301 products available for investment landlords; up from 215 at the start of the year. That is still a far cry from the 3,662 mortgages that were available in August 2007.

Rates on buy-to-let loans are also decreasing. 2 year fixed rate products now have an average rate of 5.65% as opposed to the 5.96% charged last September.

New products and reduced rates will indeed be good news for the beleaguered housing market. The CML has reported that gross lending now stands at its lowest for 10 years. £10.2 billion of new deals were agreed in April, down 12% on the previous month.

Michael Coogan, director-general of the CML wants the government to step in quickly to address the prospective funding gap that will occur when the support measures introduced during the economic crisis come to an end.

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House purchases and contractor mortgage applications fell sharply in January mainly due to the end of the stamp duty holiday on homes worth £125,000 to £175,000. In January, the average cost of a house in the UK was £163,481 according to the Nationwide.

The CML reports that loans of £4.7 billion were approved for home purchase in January, down 49% on the December figure. The figure for first-time buyers was down by 54% with only 11,300 loans approved as opposed to 24,800 in the last month of 2009.

The December figures no doubt reflect the fact that many consumers wanted to secure a loan before the stamp duty exemption ended.

Although home purchase loans fell dramatically in January, contractor remortgage loans did not follow the same trend. The decrease in remortgage loans was only 15% although this is the lowest level in 8 years.

The Council of Mortgage Lenders expects lending to remain weak over the coming months due to uncertainty over of the state of the economy and the upcoming election. This seems to be backed up by news that asking prices only rose 0.1% between February and March according to property website Rightmove.

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