Increased rationing of mortgages
January 30, 2009
According to industry officials the rationing of mortgages in the UK is set to get worse, with lenders becoming increasingly stringent when it comes to mortgage lending and with fewer and fewer mortgage products being left on the shelves.
With lenders still continuing to try and cut back on the number of loans they hand out many are also continuing to demand higher deposits from borrowers in order to offer them a mortgage loan.
Over the past month there has been an increase in the number of mortgage loans on which a deposit of at least 25 percent is required, with this number rising from 54 percent to 60 percent as a greater number of lenders try and minimise the risk to themselves.
Around 25 percent of all mortgage loan deals now on offer require at least a 40 percent deposit according to recent figures, which has priced many lower income and first time buyers out of the market.
One industry official said: “The number of deals available for those with a deposit of 25% or more continues to increase as the lenders are looking to cherry pick the best customers. Worries over falling house prices and the potential of customers getting into negative equity has caused the number of deals for customers with just a 10% deposit or less to fall to an all-time low.”
Another official said that costs had rocketed for those unable to put down a larger deposit on a mortgage loan, stating: “The spread between the interest rate you pay if you have a small or a big deposit has widened considerably. Someone with a small deposit has to pay a much bigger premium on their interest rate and they are also shut out from some of the most attractive deals, such as tracker deals.”
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