Financial News
- 14 February 2012, 0:16
Lenders Warned As 95% Mortgages Return
Low-deposit mortgage deals are back on offer for first-time buyers after the financial crisis left many struggling to get on the property ladder.
But there is concern that a surge in 95% loans could lead to lending spiralling out of control as it did before the crash.
Bernard Clarke, from the Council of Mortgage Lenders, says credit checks will be stringent to make sure that does not happen.
"The safety nets need to work on both sides, really," he said.
"Lenders still need to be very cautious in assessing the ability of a borrower to repay a loan and borrowers need to think long and hard about taking on such a long-term commitment as a 25-year mortgage."
Francesca Loftus and James Roberts struggled to save enough for the large deposit they needed.
James, 24, said: "We wanted to be able to put money in our own pot and save something so we moved home.
"We thought we'd saved enough and then we went to see a financial adviser and he said we would need to save more."
They will get the keys to their new-build in Felixstowe in a matter of weeks but they only managed to buy with the help of the Government and housebuilder-backed FirstBuy scheme.
New mortgages on offer should help other first-time buyers.
An online search on one price comparison website found 71 deals offering 95% loans.
It means those buying the average home worth £160,000 will need as little as an £8,000 deposit.
At Hopkins Homes in Suffolk the new mortgages and schemes such as FirstBuy have helped boost inquiries.
"Without first-time buyers it really does create a slowdown in a market. It makes it stagnate," said Lee Barnard, the company's sales and marketing director.
"We need to get first-time buyers onto the property ladder, which will enable people to move on and secure larger properties."
The downside is that many of the low-deposit loans on offer come with a higher interest rate and only around a third are approved for first-time buyers.
Philip Bullman, of the National Association of Estate Agents, says the problem is finding a way of getting the housing market flowing again and the new mortgages are a step in the right direction.
But what will not help, he says, is the stamp duty holiday coming to an end for first-time buyers on March 24.
"It's an anti-inspirational tax. It's another blow to first time buyers."
what do you think?
Grant Berry
This is good news, it will help the economy no end once the housing market starts to pick up.
John Low
And should in fact encourage the housing market to pick up. As long as there's no outright stupidity - 125% mortages!!!
Grant Berry
agreed
Keith Harrison
Im not so sure, i think 90% should be the upper limit, together with stringent checks on other debt, and the borrowers' ability to pay. Certainly, OTHER lenders, (eg car loans) should be made to factor a mortgage into their loans, as having an excessive car loan could be the difference between struggling to pay a mortgage and failing completely.
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Grant Berry
you are such a happy person
Hussain Ahmad
He loves to cry about everything, never mind chip this lad has a whole sack of potatoes on his shoulder.
gengisken1227
Careful matey, you're making the raving nutters look quite sane.
Robert Hare
This country is DEAD. I love your comments you should run for office.
Robert Sheldon
you are so sad you complain about everyone and everything
sunshine
Another great idea to lead the unintelligent and gullable into loans they cannot afford and wll then whinge and whine about when they cant repay the money
sociogirl
Totally agree, taking on debt of any kind is a huge commitment it is up to the individual to understand what they are doing. I'm constantly surprised how many people haven't got a clue how their finances work
Richard Maitland
Of course house builders back the governments firstbuy scheme, it helps them sell their wares at ridiculously high prices compared to what it costs to build them. The government has no business interfereing in what is a free market. By doing this they are simply keeping the price of housing up and out of the reach of the many on low wages, and stopping those that want to sell their homes from doing so. All they are doing here is looking after their big business buddies, whether they be the builders, the solicitors, the estate agents, the banks and bulding societies, and particularly the people that invest in these projects, the wealthy. The whole of the housing industry in this country is a massive rip off and the government supports this. If it were left to market forces as it should be housing would be a lot cheaper.
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Alex Krill
Totally agree 100% Richard, except that I think it is greed on the part of property developers which is the primary problem - what is needed is an "ethical" scheme or company to build and sell quality homes at affordable prices with low profit margins (Easy group or Virgin?) to get the ball rolling, then the market will have to follow suit or go bankrupt. My modern terraced house cost £32,500 12 years ago and cost less than that to build, the value of the land has not increased and at most it would now cost £40k to build one like it. Now I want to move up to a 2-bed one as my position and salary have moved on, but these have become silly money on a single income (and I'm not single through choice) and well over £100k (12 years ago they were only £45k here).
Robert Sheldon
what a load of twaddle you all speak. Why should'nt builders make a profit which then allows them to buy more land to build more houses etc etc etc .And foreign workers where allowed in this country so why should'nt they earn a living. better than sponging of the state.
peter
Of course, Robert, but for every foreign plumber, carpenter and brickie that floods here and works in the UK, it makes a British plumber, carpenter or brickie unemployed and they then sponge off the state. Theres only a limited market for work.
brian
Mortgages were made too easy to obtain. The inevitable happened and now we are in a correction phase of the house market. There's more pain ahead for the people who took out mortgages that took too much of their disposable income. People, not just the Banks and Building Societies, got greedy and short-sighted. We as a society have become too familiar with getting easy loans and in not thinking through the financial consequences. Too many are now one pay cheque away from bankruptcy. A generation has to learn financial responsibilty the hard way.
James Stevenson
Here we go again. another failure in about 20 years?
Fred Spoons
Here we bleeding go again.
Jim England
7:47am on 11/2/2012
Let's hope we're not heading back to the stupidity of reckless lending, that created a property boom that was based entirely on money that didn't really exist. Those awful Ocean Finance adverts will be back on soon - offering £25k loans secured against your home, regardless of whether you can actually afford to repay - "Josh! Dad's found your scoooota!"
Robert Hare
9:30am on 11/2/2012
Spot on Jim. I took out a loan with firstplus over 10 years 3 years into it I was able to pay it up I borrowed 10k and they wanted 16k as a settlement figure,companies like this offer nothing more than LEGALIZED ROBBERY.I paid it to be free of debt and learnt a very hard lesson.