100% increase in 0% deposit home loan applicants
Fixed rates mortgages have become increasingly popular over the last few months. More first time buyers than ever are turning to this type of mortgage, as experts suggest that consistently fluctuating interest rates are concerning customers, forcing them to look for more stability in their chosen mortgage product.
It has also been reported that the number of first time buyers looking for a fixed rate deal, with 0% deposit is also increasing. Apparently, the number of FTB’s entering into a fixed rate deal in the month of May, had rose by more than 100% faired against the month previous. New buyers are struggling to raise any type of deposit against their mortgage, and experts predict that the trend will only rise further as more and more lenders gear their products towards such circumstances.
The mortgage industry has been forced to change quite dramatically in order to accommodate market conditions. The most obvious example of this change has been seen through the prevalence of the 100% mortgage. Many lenders have had to come to terms with the fact that many first time buyers are unable to raise the type of deposit that generations previous to them would have been able to.
The average home in Britain is valued at around £200,000, meaning that the usual deposit of 10%, in today’s market, would equate to £20,000. Considering that the average 20-29 year old has an average of £3,000 in savings, raising the additional £17,000, for most, would take a very long time.
Today’s home loan lenders are now faced with two very different conundrums in order to remain competitive. The first, as already mentioned, is the need to offer mortgage products, which require no deposit whatsoever. It is probably fair to assume that lenders are reluctant to do this, but changing times call for desperate measures.
Secondly is the way in which mortgage providers charge for their products. Typically, if a person were to source a mortgage having little to no deposit, the cost of the mortgage would rise quite dramatically as a result. However, due to the highly competitive nature of the mortgage market, not only are lenders going against the grain by offering loans to people with no deposit, they are actually offering very competitive rates of interest.
However, if a borrower is able to offer a deposit to their lender they will obviously be privy to better rates of interest, faired against those who cannot. Analysts believe that the ever-changing landscape of the home loans market will eventually lead to a negative shift in house price trends, although it is highly unlikely that a crash similar to that of the late eighties with be repeated.
