An industry expert has recently claimed that an increase in the number of lower deposit mortgages is urgently required in order to help the ailing mortgage market in the UK.
The number of low deposit mortgages has plummeted since the start of the global credit crunch, with many first time buyers being pushed further out of the market despite falling property prices as a result of being unable to afford the high level of deposit that many lenders are demanding.
Before the onset of the global credit crunch many lenders were offering 100 percent and even 125 percent of the property value by way of a deposit, but all this came to an end as the global credit crunch hit. The availability of these high loan to value deals quickly disappeared.
Prior to the credit crunch the standard mortgage that many people went for was a 95 percent loan to value mortgage, but most lenders will not even look at these now, meaning that buyers need far more than just 5 percent of the property value by way of a deposit.
Many lenders are now demanding at least 15-20 percent of the property value by way of a deposit, and whilst this may be viable for home movers who have equity from their previous property to put down, the chances of finding this sort of money for the average first time buyer is bleak.
The industry expert said that whilst there had been an increase in interest amongst first time buyers recently, the housing market was still in a bad state because they could not afford to put down the high deposit, and therefore this interest was not converting into sales.
He added: “As far as the purchase buyer is concerned, there is no doubt that the greater availability of mortgages on high LTVs would be the biggest single factor to help the market.”