by Mark Johnston
In the wake of the big banks announcing large increases in profits mortgagerate.org.uk are still finding reports of a slow down in the UK mortgage market. Recent data has shown that its still much harder to get a mortgage now than it was before the credit crisis.
The overall number of new mortgages is still rising, its still a difficult market for first time buyers as the majority of mortgages are for those with large to very large deposits.
60% of the current mortgages on offer in the United Kingdom require a deposit of at least 25%, that’s a minimum of 75% loan to value (LTV). A representative from Monetfacts said: “Many of the best deals are now available for a 25 per cent deposit, having previously only been available for those with a 40 per cent deposit,”
The comparison site Moneyfacts released data that showed mortgages arrangements have increased by 66% to just over 2,350. The concern is that 60% of these require at least a 25% deposit which would be £37,500 for a £150,000 mortgage. Mortgagesrates.org.uk have started to report a change in the market with some providers offering 90% loan top value (LTV) mortgages which would require only a 10% deposit but these are difficult to get and only account for around 10% of new mortgages.
Melanie Benn from the private mortgage broker, Private Finance, said: “Lenders may offer some mortgages to those people with just a 10 per cent deposit but the reality is that they prefer less risky borrowers with at least 25 per cent to put down,”
She went on to say: “They court these borrowers with lower rates and less stringent credit scoring. Those applying for 90 per cent loan-to-value deals must pay a significant premium on the rate and face tougher credit scoring, which often results in the mortgage application being rejected. For first-time buyers, it is still incredibly difficult to get on the housing ladder.”
Another financial comparison website, Moneynet highlighted that many lenders are still recovering from the crisis and are cautious about making the same mistakes again. Andrew Hagger from the website said: “Competition among mortgage lenders has intensified throughout 2010 but it’s no surprise that over half the products on offer still require a minimum 25 per cent stake,” he said. “We may technically be out of recession but the economic situation is still fragile and lenders are taking a far more measured approach in their mortgage lending.”
Many believe that the banking sector is slowing down the recovery of the UK economy by not lending especially to small and medium enterprises but who can blame them after the recent financial crisis has changed the industry forever and the market is very different. Some of the giants have shrank whilst others have disappeared altogether. Other like HSBC have highlighted their increase in lending, the UK based global bank has lent £5 billion alone to mortgages lenders in the first half of 2010.
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