Sudden drop in mortgage deals spells disaster for property market
Mortgage deals on offer have taken a sharp downturn in recent months, after a steady climb at the end of last year. Where the mortgage market was starting to look healthy at the beginning of 2012, with a peak of 2,757 deals in February, last month saw just 2,288 mortgage deals set up with new customers, and this number continues to fall.
Experts believe that the end of the Stamp Duty holiday has had something to do with this drop, as many first time buyers drop out of taking on a mortgage now that the immediate costs are much higher. The Government explained the end of the stamp duty holiday as being because it had done little to help first time buyers in the long run, and that with the advent of the NewBuy scheme new customers were still being helped out with cheaper mortgage deals.
However, the drop in mortgage deals does seem to indicate that borrowers are less likely to apply for a mortgage at the current time, because of a difficult mortgage market with bigger costs involved in taking out a mortgage.
The current situation with lenders has not helped the situation, as a huge number of popular high street lenders and banks have started to pull back on their lending, making restrictions tighter and making high LTV mortgages much tougher to get. For those with less than perfect credit ratings, or looking for contractor mortgages, an LTV of more than 80% is becoming a thing of the past, and even borrowers with healthy annual incomes and a good credit rating are finding that the range of high LTV products is decreasing constantly.
A Bank of England survey has recently revealed that a majority of lenders are planning to cut their mortgage lending considerably over the next few months, and credit scoring criteria is set to get tighter than it has been for a few years now. This is bound to affect the mortgage market negatively, and put off perfectly suitable borrowers from taking out a mortgage unless they have a very high deposit or perfect credit score.
With these changes taking place, the mortgage market in the UK looks set to stagnate over the course of the year, which will affect the property market negatively as well, which is a great concern for those looking to sell their properties this year.
Article by: Steve Clements, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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