Your Key to a better Mortgage

Market News

June 2009

It’s not all doom and gloom

It may be too early to use the dreaded phrase “green shoots” but there are certainly plenty of potential buyers out there who are looking to take advantage of the winning combination of low interest rates and low property prices.

The catch of course is that to take advantage of the very best mortgage deals around at the moment you need a 25% or preferably a 40% deposit.

This effectively rules out most first time buyers who if they can scrape together the minimum 10% deposit are faced with interest rates of between 6.5% and 7.5%. Ironically they would have been offered far lower rates this time last year and so the huge cuts to Bank of England Base have not benefited them at all.

What has changed for the average first time buyer is the price and type of property they can afford. They may have been offered lower interest rates last year but they would have struggled to afford the price of the property they wanted to buy. Now I am telling my clients that whilst they are paying a higher interest rate, because the purchase price is probably 20% lower, it is on a much smaller mortgage so they are actually still better off.

For those buyers who don’t have much of a deposit there are still options. St Albans is an affluent area and there are many kind hearted mums and dads who are willing to help their children get onto the property ladder by providing a deposit.

There are also several government funded schemes such as “MyChoiceHomebuy” and the “Key Workers” scheme which do not require a large deposit from the buyer. Details of these can be found at www.leavalleyhomes.co.uk.

On a less positive note, one group of customers who are definitely being penalised by lenders are the buy to let purchasers. Less than a year ago the minimum deposit was 10 or 15% but now there are NO deals available unless the buyer puts down at least a 25% deposit. Even this will not guarantee a mortgage as the rental calculations are becoming harder and harder to satisfy. In most cases they only fit if – guess what - you put down a bigger deposit.

However not all purchasers will be sympathetic as many argue that they have lost out on properties in the past because they have been snapped up by landlords adding to their buy to let portfolios.

I guess there are always winners and losers in any market and a return to common sense lending and realistic pricing is no bad thing.

Yes, if you are selling a property you may have to accept a lower offer than you would like but on the other hand you are likely to have negotiated a good deal on the one you are buying. Yes there is a much larger differential between mortgage deals available with a big deposit and those on offer to customers with a smaller one, but surely that is simply the lenders doing what they should have done all along - pricing according to risk rather than lending out of greed?

We can argue about the state of the economy but one thing is certain; if you are thinking about moving – now is the time.

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