Belfast Telegraph

Saturday 26 July 2014

40% deposit is now needed for some mortgages

Lenders are now demanding a deposit of at least 40% for a quarter of all mortgages, new figures show.

Around 25% of mortgages are currently only available to people looking to borrow 60% or less of their home’s value, according to financial information group Moneyfacts.co.uk.

At the same time, there are just 21 different deals across the market for people with a deposit of 5% or less, compared with just over 1,200 in February last year.

The options for people with a 10% deposit have also narrowed, with only 148 different home loans now available, down from 1,197 in February last year and 240 just two months ago.

By contrast, the number of mortgages directed at people who have at least a 40% equity stake in their property has soared 14-fold during the past year, from 24 in February 2008, to 341 now.

Overall, 60% of all mortgages are only available to people looking to borrow 75% of their home’s value or less, up from 54% in December.

The number of different deals available to people with only small deposits has shrunk dramatically since the credit crunch first hit, as lenders have tightened their lending criteria.

The situation has been made worse by falling house prices, causing banks and building societies to look for higher deposits from borrowers to cushion them from getting into negative equity.

Moneyfacts spokeswoman Michelle Slade said: “The number of deals available for those with a deposit of 25% or more continues to increase as the lenders are looking to cherry pick the best customers.

“Worries over falling house prices and the potential of customers getting into negative equity has caused the number of deals for customers with a 10% deposit or less to fall to an all-time low.”

But the tough stance being adopted by lenders is compounding the problems in the housing market, as the large deposits now required are making it harder for people to buy their first home or trade up the property ladder.

The higher rates charged by lenders to those who do not have a large sum to put down is also reducing the potential impact of house price falls on affordability for first-time buyers.

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