Tough mortgage market conditions for first time buyers
Article source: firstrung.co.uk
The down turn in the mortgage market has almost sidelined first time mortgage buyers who are finding that they have nowhere to turn to in order to find mortgage deals to suit their spending power and take into account their deposit. The deals are limited and shrinking by the day with, according to mform.co.uk, an online mortgage company, just 36 mortgage deals available for those mortgage borrowers who are looking to secure deals with a loan to value ratio of 90% or more.
Times are bad for the mortgage borrowers as much as for the mortgage lenders with the lowest house sales ever recorded as well as mortgage approvals hitting a low of over 70 percent year on year.
The mortgage market has lost its competitive edge when taking into account the recent goings on in the financial markets; mortgage lenders are not so much focused on lending money and closing deals for mortgage applications, they are more worried about focusing on payment arrears and saving themselves from collapse in the midst of all the market turmoil. After its takeover of the Halifax Bank of Scotland, Lloyds TSB says it will concentrate on creating more competitive deals for first time buyers; according to mform.co.uk’s analysis of the mortgage market there isn’t currently much competition in this area.
As a new mortgage customer looking to secure a deal worth over 90% of the property value, you will find few deals available above the higher lending rate of 7%. The best deals are available where the equity on existing homes, or the deposit available, is between 25% and 40%. With most first time buyers being asked for deposits of around 20% to get the best rates, which amounts to an average deposit of approximately £37,000, the situation for first time buyers has not improved. Over the last half a year a dismal 109,000 home loans were approved for first time buyers as opposed to a staggering 180,300 for same time last year.
Only a few of the mortgage lenders have remained in the 95 percent loan-to-value ratio market, these are Principality, the Abbey and the Halifax, who of course cannot meet the huge demand for mortgages from first time buyers.
The Marketing and Business Development Director at mform.co.uk observes that: "First-time buyers should be benefiting as house prices fall but unfortunately they are unlikely to be able to benefit as very few have around £15,000 for a deposit."
The reasons for the abysmal house sales over the last few months are clear considering that there aren’t any friendly loan-to-value ratios in the market. At the same time, the few lenders who are still generous enough to offer the 90 per cent mortgage deals are so risk conscious that they are charging high interest rates to cover their loans in case a mortgage customer pulls out and they happen to sell the property at a cost lower than the value of the loan.
First time loan buyers are having to put their dreams to own homes on hold and it therefore seems that the only way out for them is for them to build up a deposits so that in the event that they apply for a mortgage, they are able to avoid mortgage producfts with higher lending rates and reduce the burden on their pockets.
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