How The Credit Crunch Has Effected First Time Buyer Mortgages In The UK
Prior to the “credit crunch” of 2008/09 there were literally thousands of first time buyer mortgages available to prospective UK mortgage borrowers.A large range of mortgage lenders competed aggressively for first time buyer mortgage business, in the hope that once someone takes out a first time buyer mortgage, they may remain as a customer for many years.The total UK mortgage market is influenced by the first time buyers.To maintain the momentum of sales further up the property ladder, there must be a flow of first time buyers moving onto the bottom of the ladder to keep the cycle going.It is no coincidence that now first time buyer activity has decreased, house prices have stagnated or even started to fall in many areas of the UK.
It was possible to obtain first time buyer mortgages prior to the credit crunch, with little or no deposit.To tell the truth in the period during 2005 to 2007 the mortgages were provided as 100% that is without any initial pay required from the customer.Lenders were prepared to take on the risk which high loan to value mortgages inherently pose – and the focus was directed more towards mortgage lending volume than mortgage lending quality.This is not to say that UK mortgage lending was of poor quality prior to the credit crunch – and in fact the mortgage arrears and repossession statistics over the last 24 months have shown clearly that the very vast majority of mortgages provided were of an affordable nature. While the fact still remains that the interest rates are the lowest as of now making it a potential risk for the borrowers to bear any increase in the interest rates in the next 24 months to find it hard to repay them.
It is the need for making a deposit and also more stipulations to avail the lending that many of the first time buyers are finding it hard.100% mortgages are no more and do not look set to return any time soon – if ever.Right now the first time buyers have to put in an initial deposit of 10% of the value of the property. Even in situations where the rate of interest is very competitive the first time buyers have to put in a deposit of 25%.Mortgage lenders are a lot more choosy about who they provide mortgages to – and only those first time buyers with a squeaky clean credit rating and a strong underwriting profile will be accepted .
So what is expected for the first time buyers with this now?. Well something has to change.At the moment the non-availability of first time buyers as well as the global financial crisis is the worst of its kins having an adverse impact on the UK properties.It will be so very hard when the earlier times of 100% mortgage terms come back.In order to bring in a stability to the home loan market it is advised that that there are prudent measures that are brought forth in the next 24 months to help the first time buyers as well.
Lets hope that the UK mortgage market sees sense and starts to offer strong prospective first time buyers a fair deal so that buying a first property becomes more achievable for more would be first time buyers.
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