There are quite often many individuals who are encouraged to purchase a house that is larger or more expensive than they can afford. While many blame the real estate sales agent, there is much evidence to suggest that mortgages advice from banks and lenders has been somewhat faulty and has led individual investors into making purchases that they cannot afford and walking into all manner of difficult financial situations. With these types of problems, it is easy to see how the credit crisis came to be.

CML Director General, Michael Coogan, said: “The first step for anyone struggling to pay their mortgage is to contact their lender and get advice. There are a range of options your lender can consider to help reduce or reschedule your payments for a period of time while you get back on your feet.

“Lenders will treat you fairly and use repossession only as a last resort. If you take positive action to contact your lender, pay what you can, and show up to court and make your case, you are more likely to reach an agreement your lender that allows you to stay in your home. But you cannot just walk away and assume you are no longer responsible for the mortgage.”

“More people are struggling to meet their mortgage payments and it is vital that firms treat them fairly,” said Lesley Titcomb, of the FSA. “This means paying attention to their individual circumstances and not repossessing their homes when there may be an alternative solution. Repossession has to be the last resort.”

Andrew Strange, policy director for the Association of Mortgage Intermediaries, said: “Although the number of products available on the market has dropped, there are still a large number of mortgages to choose from. During difficult periods in the market, consumers need advice more than ever and the risk of making the wrong decision is wide reaching.”

Simon Rubinsohn, the Royal Institute of Chartered Surveyors’ chief economist, said: “The data provide further evidence of the continuing pressure on the housing market. Loans for house purchases remain subdued, with first-time buyers under particular pressure. Any early relief for homebuyers in the form of a cut in interest rates is unlikely following the bigger than expected jump in inflation.”

A Department of Communities and Local Government spokesman said: “It is important to remember that UK house prices are significantly higher than five years ago. The current issue affecting the market is largely about the supply of credit – a very different situation to the early 1990s which was about high interest rates and unemployment.”

Harvey Williams, West Midlands spokesman for the Royal Institution of Chartered Surveyors, accepted that “the threat posed by rising inflation pressures is too great to be lightly dismissed and a recession now looks a very real possibility.”

He added, though, “We continue to believe that knock-on effects on pay settlements will ultimately be very modest.

“Meanwhile, both survey reports and hard data point to further deterioration in the economy, with the beleaguered state of the housing market exacerbating the extent of the downturn in the West Midlands.

“The MPC will need to ease policy as further evidence emerges that rising food and fuel prices are not entrenched in the wage bargaining process. This should be visible later in the year.”

FSA financial crime sector leader Philip Robinson says: “Mortgage fraud is a serious and widespread problem. We have set out our approach and expect the industry to do their part in tackling this menace. Brokers should make sure that they provide suitable advice and that their businesses cannot be used for the purposes of committing fraud.

“Lenders must also have in place systems and controls to reduce fraud and continue to provide us with the intelligence which is key to our success in this area.”

David Knight, analyst at Moneyfacts.co.uk commented, “Retired homeowners, who are the mainstay of the industry, have seen the value of their property shoot up over the years and have accumulated a large amount of equity in their properties, despite recent price falls. With rising inflation eating into often fixed retirement income, a further rise in the popularity of these products seems likely.”

“This is not a move that should be taken lightly so it is essential that anyone looking to release equity from their home seeks advice from a qualified adviser before doing so.”

Michael Coogan, director general of the CML, said: “Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped.”

Chris Taylor, the chief executive of Marketguard stated, “There are a host of reasons now, often based on cost, that people are turning away or are being turned away from fixed deals. Our research reveals that even the slightest increase in the Bank of England’s interest rate could tip people over the edge.”

Darren Cook of MoneyFacts stated, “Last year, there were over 15,000 mortgage products on offer and customers were spoilt for choice: providers kept their mortgages on their books on average for 30 days at a time. Now there are just 3,814 products available. According to Moneyfacts Mortgage Metrics, the average new mortgage is around for only 11 working days; indeed, last month when Bank Base Rate fell by 0.25%, new deals came and went within a staggering six days.

“I believe banks and building societies are being forced into these measures due to current market uncertainty. As a consequence, they are reducing the level of funds on offer, even though demand has not reduced. Lenders with products available are experiencing unprecedented levels of demand, which impinge on their back room staff’s ability to cope and on the company’s capacity to provide a good level of service. To avoid this, lenders are choosing to withdraw their products quicker than before in order to clear their demand bottlenecks.”

Moneyfacts Mortgage Expert Darren Cook stated, “If the current economic climate persists, it is not unreasonable to predict that we may see a situation where a higher proportion of borrowers are on their lender’s SVR, rather than on an actual mortgage deal.With lenders such as ING Direct (UK) having an SVR as low as 5.64%, this isn’t bad news for all customers. If the Bank of England maintains its current base rate level, or indeed drops it further, the lender’s SVR rates will become increasingly attractive.”

Chris Cummings, Director General of AMI, said: “In the first quarter of this year, consumers have increasingly turned to our members to seek out professional mortgage advice. For example, over 80% of First Time Buyers used an intermediary - a 10% increase on the previous year. The re-mortgage markets also saw intermediary business up by 10%.