Earlier this week the last mortgage lender who offered a 100% mortgage, one which does not require a deposit for buying a new house, withdrew their offers. This essentially means that now if you were to buy a new home you would need a deposit of some percentage in order to secure a house.
As this is happening house prices have fallen 6.9% over the past year, something most house buyers have been waiting on with baited breath for a good few years. It is a shame for first time buyers that this comes at a time that they are yet again priced out of buying a house due to the mortgages market being so expensive and selective at the moment.
The only concern now is that people who are looking to buy a home on their own are likely to run in to problems unless they have very high paying jobs. It is becoming more common for couples to buy homes together or even two friends so that they can get their foot on the property ladder, as opposed to getting trapped in the rental market.
Whilst 100% mortgages have vanished the future of its nearest option the 95% mortgage looks next in line to become obsolete. Analysts have predicted that some day soon the only way you’ll be able to afford the repayment rates will be by putting forward a 25% deposit, something that nearly all new house buyers and people nearing time to remortgage can simply not afford.
For now the 95% mortgages are the best option for borrowers as the rates remain fairly low such as 6.34% on a Variable rate Tracker. If you were to somehow pay a 25% deposit then you could look forward to nearly a half percentage point drop to 5.75% on repayments.
The trouble with such a high level of lending is that you may fall victim to a HLC, A HLC is a Higher Lending Charge where if you are only paying 5% of the property’s value and leaving the rest to the mortgage then no matter what deal you can get on rates they’ll pale in comparison once the higher lending charges are added to the total.
Mortgages seem to be picking up the slack where house prices have fallen and made it tougher for the average wage earner to be able to buy a new house unless you get a bit of help by having more than one person buying the house. With the number of friends buying houses together rising it may be worth seeing if you can get yourself a house mate if only to be able to afford the house at all!
