by Mark Johnston
First time buyers have had it pretty hard for the past few years. The financial crisis forced banks to tighten their lending criteria and as a result, those looking to get onto the property market were left out in the cold. Whilst it was still possible to secure lending for first time buyers, they needed to have pretty big deposits to but down against the house of their dreams in order to minimize the risk to banks and building societies.
At the beginning of the year things looked pretty dyer for first time buyers but things have started to improve as more and more lenders have balanced up their accounts and are more confident to lend to this essential part of the housing market.
Before the credit crunch and financial crisis lenders were offering 100% mortgages but post melt down these are long gone together with 95% mortgages. We are now seeing a re-emergence of 90% loan to value mortgages which require much smaller deposits.
During this year the total number of 90% mortgages have increased. At the end of 2009 there were around 116 90% deals on the market whilst today this has risen to 204. Again, 85% mortgages have also increased. In December 2009 there were 254 of these types of loans whilst a year later there are 470, an increase of 85%.
Its great that there is more choice for first time buyers but with choice comes the big benefit, price. As more lenders fight for an ever dwindling pot of customers who have large deposits, their focus has turned to first time buyers. As more 85% and above loans have been launched on the market the competition has increase which in turn has driven down price.
The Spanish bank Santander launched a three year fixed rate mortgage recently. The home loan only requires a 15% deposit with a rate of 5.69% and a fee of just £495. Norwich and Peterborough building society also launched a great deal for those with smaller deposits. Their two year fixed rate at 3.89% has a £995 fee and only requires a 15% deposit.
Although it may well seem like Christmas has come early for those who have been left out in the cold this winter the good deals may only last as long as the current cold spell. The city regulator is due to publish the results of its mortgage market review which many believe will reduce the amount of choice available in the market and will also make if much harder to get a loan especially with a smaller deposit.
Although most people welcome more regulation to prevent the financial meltdown of a few years ago, many think that the new rules will go too far and kill off the industry and potentially cause a house price crash. The Council of Mortgage Lenders (CML) have suggested that if the suggested rules were applied this year, around half of all new mortgage customers would have been turned down.
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