Lenders have started to withdraw 100% mortgage products from the market in a move that could spell disaster for first time buyers.
Not so long ago lenders were dolling out 100% mortgages left, right and centre as a means of giving first time buyers a leg up onto the very expensive property ladder. Unfortunately times have changed and lenders that offer 100% loan to value mortgages are becoming few and far between.
After the sub-prime crash and Northern Rock crisis UK mortgage lenders are taking a much more cautious approach to both the products they offer and who they offer them too. Since October ’07 alone, 10 mortgage lenders have withdrawn their 100% products from the market while, according to moneyfacts.co.uk, 11 lenders have reduced the loan to value ratio available on at least part of their mortgage range in the last 8 months.
Other lenders who still offer a full range of 100% products have become more choosy about who they will lend too, with parental guarantors and young professionals becoming the borrowers of choice.
Over the past few years lenders have been more than willing to lend first timer buyers over and above the complete loan to value cost of their new home provided they could afford the repayments. This is a strategy which has given many individuals the opportunity to purchase a house they would otherwise have be unable to afford.
As a consequence, this recent shift in the market could spell disaster for the first time buyers who have been waiting in the wings for house prices to fall as many will be unable to afford the now necessary deposit.
Many mortgage providers have started to ask for a 10% minimum up front and when you consider that the average house price in the UK is over £230,000 this would mean first time buyers would need to save up a massive £23,000 deposit before they could become eligible for leading products, something of an unachievable sum for many.
This is not to say that 100% mortgages are no longer available as a number of lenders are still offering this option. However, most are going about it much more cautiously than they were just a few months ago. Only time will tell how big an impact this will have on the number of first time buyers entering the housing market this year.
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