Much larger deposit required from first time buyers
March 31, 2008
Whilst industry experts are stating that first time buyers can at last look forward to increased affordability due to falling house prices and interest rates, both of which are expected to continue falling over the course of this year, affordability may not be as great as many think, as first time buyers are now having to stump up more money upfront as a result of increased deposits required be increasingly stringent lenders who want to cut back on their risks.
Over recent weeks a number of lenders have announced that in order to gain access to their most competitive deals borrowers will have to put down more money by way of a deposit. This is going to hit first time buyers hard, as they have no previous property from which to use equity to put towards a property. In the past first time buyers have been able to get away with no deposit, as they have often had access to 100% and 125% mortgages, but an increasing number of lenders have taken these deals off the market.
In fact, even the traditional 5% deposit is in danger of disappearing according to some professionals, as more and more lenders look at trying to get the highest deposit possible from borrowers. In order to gain access to competitive rates some lenders are now asking for around 10 to 25% of the property value by way of a deposit, and some are looking for even higher deposits. Those unable to put down the larger deposits – often first time buyers – will either find it very difficult to get finance or will be faced with extortionate interest rates.
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