According to a recent report 100% mortgages have become far harder to come by these days, with lenders cutting back on offering riskier finance as a result of the credit crunch that has swept across the UK’s money markets. 100% mortgages have always been popular amongst first time buyers, as they enabled them to get a mortgage to buy a property without having to put down a deposit – something that has always been difficult for many first time buyers who have no previous property from which to use equity towards a deposit.
The reduced availability of 100% mortgages is likely to impact heavily on the ability of many first time buyers to purchase a property, as many are unable to raise the necessary 5% deposit needed to put down on a house given the high value of properties at the moment. Moreover, a number of lenders have announced that they are increasing the amount of deposit required from 5% to 10%, which means that for fist time buyers that cannot get a 100% may have to try and raise twice the traditional deposit in order to get onto the property ladder.
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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