No deposit, no chance

Published:

13/05/2009

Topic:

Press Release,Mortgages

New figures from moneysupermarket.com reveal the extent of the disparity between supply and demand of mortgages at a high loan to value (LTV).

• 17 per cent of people looking for mortgages at 90 per cent LTV
• Yet just six per cent of products fall into this category
• 30 per cent more expensive to take out a 90 per cent + LTV product compared to a 75 per cent or less product

Sourced by www.moneysupermarket.com 07.05.2009

First Time Buyers

Although house prices have fallen the lack of supply of high LTV loans is a particular concern for First Time Buyers (FTBs). To have a good chance of getting a mortgage at a competitive rate of interest FTBs will need to have saved a deposit of many thousands of pounds.

Homeowners

House prices have now fallen 19 per cent since the peak in 2007*. This means anybody who bought their house in the past few years with a LTV of 75 per cent or less will now either be in negative equity of have less than 10 per cent equity.  Many of these borrowers are effectively trapped with their existing lender until house prices rise again or unless they can make overpayments to reduce their mortgage.

Louise Cuming, head of mortgages at moneysupermarket.com, said; "Despite falling house prices, finding a large deposit is no mean feat, we're generally talking about many thousands of pounds. It is a shame lenders continue to be so equity focused - if an applicant can prove they are able to afford repayments, they should be trusted with the mortgage.

"Not only will those with smaller deposits find it harder to get a mortgage, but when they do they are likely to be charged a higher rate. The average rate for mortgages at 90 per cent + LTV is 6.26 per cent, however if you have a bigger deposit you will be charged much less. The average rate for a mortgages between 75 and 89 per cent LTV is 5.1 per cent, and the average rate for a mortgages between 60 and 74 per cent LTV is just 4.8 per cent - making it 30 per cent more expensive to borrow at 90 per cent + LTV than under 75 per cent.

"Prospective borrowers should look to save as large a deposit as possible before making their move into the market. Building a 20 per cent deposit is likely to mean significantly lower monthly repayments."   

- ENDS -

Notes to editors:

* According to the Nationwide House Price Index the house price peak was in Q3 of 2007 where the average house price was £184,131.  The average in Q1 of 2009 was £149,709 giving a drop of 18.69%.

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