The global credit crunch sparked off within the American sub-prime lending market during the end of last year, and is showing no signs of letting up. In fact, many market analysts predict that it will be a considerable amount of time before the world's financial markets return to a level of affordable stability.
Even though the Bank of England has taken measures to try and ease the effects of the crunch, by recently cutting the base rate twice – many lenders are still raising their interest rates. This is because of the difficulties lenders are having trying to find affordable finance on the wholesale market to back up their lending.
The effects have been felt both within the unsecured and secured lending markets, with mortgage lending being particularly hard struck. Over the months many mortgage lenders have been increasing their interest rates or completely withdrawing their products from the market, with 100% mortgages becoming a very negative area.
Within the last week the last major UK lender still offering 100% mortgages decided to fall in line with other lenders and withdrew their product off the market.
This is very bad news for first time buyers who, without the required deposit, rely upon 100% mortgages to purchase their first home as no deposit is required. Many lenders are now capping their LTV (Loan to Value) mortgage lending at 95%, which can result in deposits easily reaching into the thousands.
This combined with the valuation, legal, solicitor and other fees incurred when buying a home will make getting onto the property ladder considerably difficult. Moreover, many lenders are taking further steps to ensure they do not lose out by increasing the typical 5% deposit required to 10%.
Even though those wishing to purchase a new home are going to find it more difficult than they would have say, this time last year – it’s not impossible, and as long as the correct advice and information is sought then it could easily prove affordable.
Affordable mortgages are still out there, it will just take more effort to seek such mortgages out on the buyer’s behalf. Offset mortgages may be a more suitable option for those with large amounts within their current accounts.
