by Mark Johnston
The number of first time buyer mortgages dropped to a record low following the financial crisis. Banks and building societies struggled to get their balance sheets in order and pulled more risky products from sale. In recent months, lenders have returned to offering products aim at those with smaller deposits. Although there is still no sign that banks and building societies have returned to the same lending levels as before the crisis, the number of products of this type is the highest its been for over two years.
Many lenders still ask for a deposit of around 25% of the value of the property borrowers are looking to purchase but this accounts for less than 50% of the market. This means there is hope for those with 15% deposits or even 10% as over 50% of the number of mortgage that are agreed account for loans that require deposits of 25% or less.
Those borrowers with around a 20% deposit have seen the number of products available to them increase massively in the past few years. Back at the start of 2009 there were just less than 100 mortgage products available whilst in 2011 there are almost 400 to choose from.
Borrowers with an even small deposit have a reason to be happy too. Those first time buyers with a 15% deposit have a whopping 560 mortgages with a loan to value (LTV) of 85%, that’s a 250% increase in the last year or so. Even those with just a 10% deposit have more selection to choose from. Recently there were only 94 mortgages that would accept a 10% deposit where that has grown to 214 today
All in all the total number of mortgage products available has risen rapidly. Ion the past two years the number of loan products has gone from 1,097 to 2,447. Only a few types of mortgage have decline, these include 40% mortgage which have dropped by 28%.
The worry is still the amount of loans that lenders are agreeing. Although there may be lots of products on the market, if banks and building societies don’t agree loans there is no point in having the products.
A spokesperson at a leading money website said: “Although lenders’ windows may be full of best buy deals, it doesn’t mean they are wanting to lend. The increase in the number of mortgage deals for those with smaller deposits is encouraging, but only a limited number of such mortgages are likely to be approved. Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they will accept.”
Experts are concerned that the new rules being brought in by the FSA will make lending by banks even harder. If the Financial Services Authority put additional regulatory pressures on lenders to tighten their lending criteria it could become even more difficult to secure a home loan.
The Bank of England published net lending figures of just £8.15 billion which is down from £11.33 billion in 2009, the last time figures were this low was in the 1980’s when interest rates were hitting 10%
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