Nelson Mortgages

Following announcements from a number of lenders in relation to their LTVs it seems that first time buyers could be facing increased difficulties again, just when many thought that falling house prices and lower interest rates may have enabled more non-homeowners to get onto the property ladder. It now seems that finding a 100% mortgage or even a 95% mortgage may be getting more difficult, and for first time buyers with no previous equity to use towards purchasing a property this could mean that they can no longer afford to buy a home.

Although house prices are set to fall the cost of a property in the UK is still high, and raising just 5% of most property values in the UK can prove extremely difficult for first time buyers. This is why many have relied on 100% mortgages in the past, where no deposit has been required. However, with many lenders deciding to take their 100% mortgages off the market, more and more first time buyers will have to raise a deposit before they can get a mortgage.

There is more bad news. A number of lenders, including the Alliance and Leicester and the Britannia, have announced that borrowers will now need to put down a minimum deposit of 10% instead of the traditional 5%, which means that buyers will need to raise twice as much deposit as before. These changes have all stemmed from the tighter lending conditions resulting from the credit crunch.

One potential house buyer who is still renting at present stated: “I thought I might be able look at buying this year, with property prices coming down and hopefully interest rate falling. But there is no way I can afford to raise a 10% deposit – I don’t think I can even raise 5% on top of all the other costs that have to be taken into account.”

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