Bigger Deposits Required For Homeowner Loans
High loan to value ratios on mortgages and homeowner loans are becoming quite scarce, as banks and building societies continue to withdraw their products from the market place and reduce the level of risk they are prepared to take on any kind of loan.
Since the beginning of the credit crunch last year, there has been a steady decline in the number of available homeowner loan products, particularly in the high loan to value areas, due to the increased risk and higher default levels associated with this type of lending.
According to research from Moneyfacts.co.uk, there are now only 3,281 mortgage loan products available in the market place and many of these will only allow relatively low loan to value ratios.
Banks and building societies are covering themselves against the continuing falling house prices and the potential for negative equity on many of their mortgages and loans by reducing the maximum available loan to value, in many cases this is now as low as 60 per cent of the overall price of the property to be purchased. The number of mortgage products which now require a minimum deposit of 40 per cent (maximum 60 per cent loan to value) has gone up to 155, which is an increase of 84 per cent since last year.
Darren Cook of Moneyfacts said “The difficulties lie in the lack of liquidity within the market and providers having no appetite or being unable to lend on a larger scale. In essence, the price list shows that mortgages are getting a little cheaper, but the stock rooms are currently nearly empty.”
It is now hoped that the recent cut in the bank base rate of interest and the prospect of further cuts, coupled with the Governments recapitalisation scheme for many of the major UK banks, will restore some level of confidence to the market, both for lenders and borrowers and help revitalise the mortgage and general loan markets.
