100% mortgage getting increasingly difficult to find
January 30, 2008
A recent report has indicated that finding a 100% mortgage deal has become increasingly difficult over recent months, as credit conditions have become tighter and tighter in the UK, and this situation is set to get worse over the course of the year according to some industry officials. The credit crunch that swept across the UK last year has had a number of repercussions, and many lenders have had to tighten their belts when it comes to lending in light of factors such as bad debt levels and difficulties with inter-bank lending.
The report suggests that a number of lenders who previously offered 100% mortgages have now decided to take these off the market, whilst a number of others have cut back on the products on offer. Figures show that the number of 100% mortgages available in the UK has been cut by one third by the country’s banks and building societies over the past few months, reflecting the effects that the credit crunch has had in the country.
In fact, some lenders have not only taken their 100% mortgage off the shelf altogether, but are now asking that potential borrowers put down a higher deposit than the traditional 5%. A number of lenders are now asking for a minimum 10% deposit, which could make it impossible for some people to raise the necessary deposit to put down on a home, even in cases where house prices have fallen.
One industry official said: ‘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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