Problems getting a mortgage
Where is the UK mortgage market at present and where is this financial market heading? The reports in the press now detail many bad news stories for the housing market and that the mortgage sector is going through what must feel like to many as a dramatic re-assessment of it practices and lending procedures.
As many as 23,000 home owners whom have taken out 100% mortgages since March this year face a negative equity situation at present. However, this only totals 5% of mortgages accepted in this same period. The information from the Council of Mortgage Lenders (CML) comes as figures from within the industry support the fact that the housing market is slowing down further.
HIP-Consultant.co.uk deal with many estate agents and home sellers through providing our Home Information Packs solution. It is common place that agents are only selling about a third of the levels they have become accustomed to. It seems inevitable many estate agents will close or consolidate their positions due to the challenging conditions.
First time buyers are struggling to secure a mortgage; often even with a previously considered good amount as a deposit. Many first time buyers are seeing the part-buy, part-rent as one of the most viable remaining options as the UK’s desire to own their dream home certainly does not seem to have diminished any to date. These arrangements often result in the buyer owning a 25-50% stake in the property and making payments towards a mortgage and rent per month.
Yes, it certainly is harder to obtain a mortgage and it does not seem to be considered it will relax over coming months. However, houses prices falling is this such a bad thing when most are considering moving to larger more expensive properties myself included? No, is the reality in this scenario and this fact seems to be missed by many. But how?
When this is considered we must remeber that our houses are largely our homes and not solely investments. Lets take our average couple or small family that wants to upgrade from a 2 bed to a 3 bed property and for arguments sake each are valued at £150,000 and £200,000 respectively.; the cost to upgrade is £50k. The market continues to fall;we are now into the eigth consectutive month of falling house prices. For arguments sake the prices fall a total of 15%; the 2 bed is now valued at £127,000 and the 3 bed £170,000 making the cost to change now £42,500. So in this scenario you would of ineffect have saved £7,500.
So what are the characteristics of the mortgage market we are likely to see in the future? It is inevitable with the current credit crunch that lending is becoming and will continue to be much more frugal with risk being analysed to a greater extent as many feel it should of been prior.
- Reduced loan to earnings ratios
- 100% mortgages being resigned to the history books
- Action being taken earlier in regard to missed mortgage payments
The mortgage market has for years been a profitable undertaking for the lending institutions many believing it was a no lose market. Now is the time that this is reassessed and more responsible lending returns. This may seem harsh to some who will struggle to obtain a mortgage when comparing this to previous terms and banks’ attitudes towards mortgages. However, with these ‘old fashioned’ values being re-instated comes increased long term relative stability and security for those accepted for mortgages.
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