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A handful of mortgage lenders are being inundated with applications as competitive deals become increasingly rare.

Mortgage comparison website mform.co.uk said up to six out of 10 applications from both home movers and people remortgaging made through its site had been to just three lenders during the past month.

The group said between March 15 and April 18 up to 60% of all mortgage applications it handled were for home loans with The Principality, West Bromwich Building Society and the Co-operative Bank.

It added that just 17 out of 90 lenders dominated applications through its service during the past month, but before the credit crunch struck more than half of lenders had deals that could be considered to be competitive, attracting a significant amount of business.

The group said HSBC had seen a surge in applications, particularly since it launched an offer under which it will match rates for people coming off fixed-rate mortgages, as had First Direct, which stopped writing mortgages for new customers on April 1 after being inundated with applications.

Other lenders that have featured prominently in applications being lodged include Halifax and Norwich & Peterborough Building Society.

The group said the recent market turmoil, which has seen lenders hike their rates and pull products that are attracting too much business, is leading to consolidation in the market.

It added that the Co-operative Bank, HSBC, Principality and West Bromwich Building Society featured as the cheapest lender on a true cost basis in 67% of searches done by customers on its site.

U.K. house prices rose in February for the first time in four months after two interest-rate cuts by the Bank of England encouraged sellers to demand more for their homes, Rightmove Plc said.The average asking price climbed 3.2 percent to 237,856 pounds ($466,000) from January, compared with a 0.8 percent decline the previous month, Britain’s most-used property Web site said today. In London, values increased by 0.9 percent.

“With a couple of interest rate drops,” homeowners seeking to sell “are probably thinking the outlook is more positive,” Miles Shipside, commercial director at Rightmove, said in an interview with Bloomberg Television. “They’ve got the whole year to pitch their asking price. It’s not the return of a boom.”

Other reports have shown the property market slumped after the benchmark interest rate reached a six-year high in 2007 and credit costs rose. Bank of England Governor Mervyn King said last week that further price drops are “possible” as economic growth slows and banks curb loans to consumers.

The average time a property spent on the market rose to 93 days from 78 days a year earlier, Rightmove said. Average stocks per real-estate agent increased to 64 from 54 in February 2007.

Morgan Stanley will cut 1,000 jobs from its mortgage business and shut the UK sub-prime home loan division that it bought just over two years ago amid worsening market conditions.

The American investment bank blamed a “dislocation” in mortgage markets for redundancies in the United States and Britain, which will involve the closure of Advantage Home Loans, its UK mortgage division. About 160 jobs are likely to go at the business based in Ellesmere Port, Cheshire.

Anthony Meola, chief operating officer at Morgan Stanley, said: “Given the dislocation in the mortgage markets, we have restructured our residential mortgage business to ensure we are appropriately positioned for the environment going forward.”

Morgan Stanley bought Advantage at the end of 2005 as a way into the then-lucrative British sub-prime mortgage market. One of the bank’s headline-grabbing deals was a loan aimed at first-time buyers that offered some borrowers seven times their income.

UK House prices fell by £4,000 (2.1%) in January 2008 (Halifax), the average price falling to £191,275, down £9,806 (4.8%) from the August 2007 peak of £201,081.

The Market Oracle forecast as of August 2007 is for a fall in average house prices of 15% over two years to August 2009.

UK interest rates were cut yesterday by a further 0.25% taking interest rates down by 0.5% from its peak of 5.75% (Forecast December 2006), the cuts to date and further anticipated cuts during 2008 are being mistakenly taken by many market commentators, economists and large mortgage banks such as the Halifax to imply that UK House price inflation will be neutral during 2008.

Therefore this article illustrates why house price inflation will start going negative by April 2008.

U.K. home values fell for a third month in January, the longest stretch of declines since 2000, and the housing market will cool further as demand from property investors wanes, Nationwide Building Society said.

Prices declined 0.1 percent from December, when they dropped 0.4 percent to 180,473 pounds ($359,000), Britain’s fourth- biggest mortgage lender, said today. From a year earlier, values rose 4.2 percent, the least in two years.

Home-loan approvals fell to the lowest in at least nine years last month as higher borrowing costs and a curb on lending helped drag out the worst housing slump for more than a decade. A slower market will go “hand in hand” with weaker consumer spending, Bank of England Governor Mervyn King said last week.

The mortgage data “undoubtedly signals a continued cooling in annual house-price inflation,” Martin Gahbauer, a senior economist at Nationwide, said in a statement. “New demand from buy-to-let investors is likely to weaken in 2008.”

Consumers, already burdened with record 1.4 trillion pounds of debt, face higher costs for loans after banks around the globe posted at least $133 billion in losses from the collapse of the U.S. subprime mortgage market.

In light of the expected slowdown in the housing market a number of lenders in the UK have reduced the amount of money that they are prepared to lend to potential property purchasers looking for a mortgage.

According to a recent report around eleven mortgage lenders have cut their lending levels as a result of prediction of a continuing slowdown in the property market.

The report claims that the lenders have cut their loan to value maximums on a range of mortgage products since December.

A number of studies, reports, and analyses have all pointed towards a current and continuing slowdown in the housing market, with falling house prices expected as well as reduced demand in some areas, in addition to some reports of fewer properties coming onto the market because of the costly and controversial Home Information Packs amongst other factors.

The report goes on to state that a number of lenders have now stopped offer 100% mortgages, where consumers can borrow the full value of the property without having to put down a deposit – something that many first time buyer relied on in the past because they had no equity from a previous property to put towards a deposit on a property purchase.

Some lenders have apparently stopped 100% mortgages to anyone that cannot provide a guarantor.

A variety of other mainstream lenders have reduced the amount that they will lend, cutting maximum borrowing levels from 95% of the property value to 90% of the property value on a variety of mortgage products.

One industry official said that the turn of events was understandable given the long period of 95% LTVs offered as a norm by most lenders, and considering that some lenders had been offering up to 130% LTV.

He added that the move came as no surprise taking into account the subdued housing market, the bleak outlook for the imminent future of the housing market, and the state of consumer debt within the UK.

Economists and analysts have predicted that house prices will either stagnate over the course of this year or will drop, although most do not expect the drop to be a highly significant one.

The number of households defaulting on their mortgage payments is expected to rise over the next three months, the Bank of England has warned.

Its gloomy assessment comes as it says the global credit crunch is likely to worsen into 2008, as banks become less willing to lend out funds.

The Bank’s comments came as it said homes and firms found it harder to borrow funds towards the end of 2007.

Its findings may raise hopes of a further cut in interest rates.

The Bank’s comments came in its latest quarterly Credit Conditions Survey, which covers the last three months of 2007.

It said banks were now less willing to lend because of the higher cost and reduced availability of credit.

The perilous state of the housing market has proved an unexpected boon to Rightmove the property website.

According to the company, desperate estate agents have been turning to the website to help them to complete sales.

Rightmove said in a trading statement yesterday that profit before tax was likely to be at the upper end of the forecast range, £29.3 million to £32.3 million, as much as 82 per cent up on last year’s pretax profit of £17.7 million.

About 90 per cent of British estate agents now subscribe to the website, which charges £325 per office to host adverts.

Despite nearly running out of estate agents, the company said it was confident it would be able to increase prices. This year has already seen prices raised 30 per cent, from £250.

In a sign that housebuilders are increasingly anxious about selling on new homes, there was a 39 per cent increase in the number of new-build developments signing up to the site. The 20 biggest housebuilders all now use Rightmove.

A spokesman for the company said: “The housing market isn’t doing very well, so people tend to think that Rightmove won’t be doing very well. But because agents are having to work harder to sell properties, they are putting their discretionary spending where they get the best returns.”

He added that Rightmove would be insulated from any downturn until the point that estate agents start shutting offices. Rightmove accounts for about 10 per cent of property advertising spending, with the majority going to the local press.

The update came as Bellway, one of Britain’s biggest builders, suggested it was weathering the storm better than its rivals as sales remained steady over the past six months. Persimmon, Redrow and Bovis Homes have all reported declines this year.

A Council of Mortgage Lenders survey this week showed that the number of new mortgages taken out fell to a seven-month low in November.

A U.K. house-price drop of 10 percent next year may be no “bad thing” because it would help poorer Britons afford a home, Morgan Stanley economist David Miles said.“There’s a gain for people about to trade up or first-time buyers, and that offsets the loss when house prices are falling,” Miles, who advised the Treasury on the British property market, said in London yesterday. “

On balance, it’s almost certainly redistributive to people who are younger and less well off.”

Miles said investors’ bets show they forecast house prices will decline by as much as a tenth in 2008, ending a decade-long boom in which values tripled.

The Bank of England cut the benchmark interest rate last week to preempt the outlook for slower growth after the collapse of the U.S. subprime mortgage market pushed up borrowing costs worldwide.

“For the majority of parts of the U.K., house prices are falling mildly on average,” Miles told a seminar organized by the National Institute of Economic and Social Research, a research group whose clients include the Treasury and the central bank. “That is not a bad thing.”

Britons are living with their parents for longer than they used to as gains in house prices make it less affordable for them to buy their own place, a government report said in April.

Mortgage interest payments for first-time buyers, as a percentage of income, rose to 20.6 percent in October, the highest since 1971, data from the Council for Mortgage Lenders showed yesterday.

Britain’s mortgage lenders face a £30 billion funding shortfall next year if the Bank of England does not step in to ease the credit squeeze, the industry’s lobby group said yesterday.

As much as a third of the £90 billion required to finance the demand for mortgage loans expected next year will need to come from money markets that effectively have been closed since August, the Council of Mortgage Lenders (CML) said.

But as the CML pleaded with the Bank to intervene to prevent a severe contraction in the availability of mortgages, banks were told to get their own house in order by the City’s regulator.

The Financial Services Authority (FSA) said that lending conditions could get worse and that lenders should forgo profits to protect themselves against a collapse in liquidity of the sort that crippled Northern Rock.

The stark warnings, presented yesterday at the CML’s annual conference in London, come at a time of deepening gloom over Britain’s mortgage market.

New loans for house purchase are down by 31 per cent over the past year and all big surveys have shown house prices falling in recent months.