According to a recent report first time buyers are now experiencing increased difficulties in getting 100% mortgages, as lenders become increasingly wary in light of the credit crunch and cut back on riskier lending. The report shows that the availability of 100% mortgages, which have proven popular amongst first time buyers with no equity or savings to put towards a deposit on a first home, has been slashed over recent months, with lenders getting more and more reluctant to offer 100% loans.
Since last summer, when the credit crunch swept across the UK having been sparked in the sub-prime mortgage sector in the UK, banks and building societies in the UK have slashed the number of 100% mortgages available by a third. This is hitting many first time buyers hard, as they have no equity from a previous property to use as a deposit and in many cases do not have the level of savings required to cover even a 5% deposit based on the current high house prices.
Since July of last year almost a third of lenders that were offering 100% mortgages have now taken them off the shelves altogether. A number of lenders have also increased the level of deposit that they require on standard mortgages, with many charging higher rates of interest on loans for over 90% of the property value.
One industry professional stated: ‘This is an understandable about-turn from the lending strategies we have witnessed over the past five years or so, when lenders pushed LTVs to highs of 130%, with 95% products considered the norm. It is not hard to understand why this pattern has emerged. With mounting evidence that housing prices are cooling, combined with the increasing number of borrowers facing debt problems, it is not welcome news for those consumers with only a small amount of equity.’
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