Wednesday, May 20, 2009
Category:
Property
According to the Moneyextra.com mortgage index, the average loan-to-value rates and the number of mortgages available are at their lowest point in two years.
Compared to this time last year, there has been an 84 percent reduction in the supply of borrowing to prospective first time buyers that are in possession of a 10 percent deposit. Additionally, just 36 percent of those with a 15 percent deposit are finding suitable opportunities compared to the first quarter of 2008. Findings reveal that first time buyers are now looking at an average loan-to-value of 71 percent, whereas this stood at 82 percent last year.
Mortgage expert, Richard Mason of Moneyextra.com commented, "It's a catch 22 for first time buyers, the depressed market means there are bargains to be had but it's difficult to get on the ladder without a good deposit. Although there are loans available, on the whole lenders are being very prudent. We need to see some movement here in order to get the housing market moving again. Without plenty of competitive mortgages to choose from things will become even more stagnant.”
First time buyers are not the only group to be affected by a reduced loan-to-value. Those looking to re-mortgage are also faced with a 69 percent loan-to-value as opposed to the 82 percent witnessed this time last year.
The Moneyextra.com housing index shows that total mortgage lending at the beginning of March was at its lowest level for two years. However, by the end of the month a 13 percent increase was noted, which is arguably positive but not necessarily set to continue according to Mason.
Mason encourages people in arrears to seize the opportunity to organise their finances, whether this be via re-mortgaging or downsizing where the former is not an option: "People who feel they are going to hit problems should look to downsize on their own terms and avoid losing everything and being hit by a triple whammy of financial grief.
‘Whammy number one’ is associated with the potentially low resale price of a repossessed property. When a home is repossessed, the lender is only looking to recover the value of the borrower’s outstanding loan and will therefore tend to sell at 10 to 15 percent less than the property is actually worth. Mason describes ‘whammy number two’ as the chance of remaining in debt even after a home has been repossessed. This is possible due to the fact that lenders will typically aim to complete a sale within three months, which means aggressive marketing via estate agents and substantial legal expenses. Finally, ‘whammy number three’ can affect borrowers during the period in which their property is on the market. At this point the individuals could not only find themselves homeless but also with rising debts.
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Homeowners who are struggling with multiple monthly repayments on personal loans, credit cards and/or store cards may wish to consider consolidating these with a debt
consolidation loan. One of many finance options, this could leave the borrower with just one simple, potentially lower, monthly repayment. Where the repayment is lower than existing monthly outgoings, the extra money could be saved for the future. When taking out a debt consolidation loan, it must be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
