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Credit Crunch: What Does It Mean For UK Mortgages?

April 5, 2008

There has been a real turnaround in the financial markets since the start of 2008. The fallout from the subprime mortgage problem in the USA is being felt on this side of the Atlantic. But what does this mean for you if you’re trying to get a mortgage to buy your first home or trying to remortgage?

The basic fact is that there is less money available in the money markets for lenders to use. This means that they have less access to funds to provide for mortgages. This has led to many of the more attractive mortgage products disappearing from the market. There are now less than half as many mortgage products available as there was 12 months ago.

Many of the products to have disappeared include those in the subprime market which were available to people that had a poor credit record. There are also less buy to let products and you are likely to have to find a bigger deposit to fund an investment property. 90% buy to mortgages have gone and 85% deals are becoming more rare. If you are investing in property, you will now have to do your figures even more carefully than ever.

Earlier this year saw the end of mortgages where you could borrow more than the property’s value. This included 125% mortgages offered by the likes of Northern Rock. Another milestone has just passed (early April). The last 100% mortgage has just been pulled by the Abbey. This means that first time buyers will now have to find at least a 5% deposit to get on the property ladder, or get parental support. Industry experts predict that this may not be the end of mortgage products being withdrawn. It may be necessary to find a 10% deposit in future.

With the best mortgage products being constantly withdrawn by lenders, there is the very real chance that the housing market will suffer a slowdown. Even people who just want to remortgage to a better deal are not immune as the most attractive offers are similarly being pulled off the market.

by Paul Elms

Written by paydayla · Filed Under Home Loans 

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