More mortgages for borrowers with lower deposits
Wednesday 02 February 2011
The proportion of mortgages available to people with small deposits has risen to its highest level for two years but there is little sign that banks are increasing their lending levels, research indicated today.
Loans that require borrowers to put down a deposit of at least 25% of their home's value now account for less than half of the market for the first time since January 2009, according to financial information group Moneyfacts.
Mortgages that require a deposit of this size now account for 46% of all available deals, with loans which accept smaller sums or no deposit at all accounting for the remaining 54%.
Borrowers with a 20% deposit have seen a three-fold increase in the number of deals they can choose between in the past two years, with these rising from just 97 in February 2009 to 390 now.
There has also been a rise of just over 250% for people with 15% to put down, with 560 loans now available, while choice for borrowers with just a 10% deposit has more than doubled, rising from 94 products two years ago to 214 now.
The only area of the market where choice has declined is for people with a 40% deposit, with the number of loans for these borrowers falling by 28%, as lenders instead make their best deals available to those with 25% or more to put down.
Overall, the number of different mortgages on the market has more than doubled in the past two years, rising from 1,097 to 2,447.
But Moneyfacts cautioned that the increase in choice for people with smaller deposits did not necessarily mean lenders were more willing to advance money to these customers.
Michelle Slade, spokewoman for Moneyfacts.co.uk, said: "Although lenders' windows may be full of best buy deals, it doesn't mean they are wanting to lend.
"The increase in the number of mortgage deals for those with smaller deposits is encouraging, but only a limited number of such mortgages are likely to be approved.
"Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they will accept."
She added that banks and building societies' lending criteria was likely to get even tighter in future as they implemented tough affordability checks which are being proposed by the Financial Services Authority.
Figures released by the Bank of England yesterday showed that net lending in 2010 fell to just £8.15 billion, down from £11.33 billion in 2009 and the lowest level since records began in 1987.
The figure was worse than the £9 billion the Council of Mortgage Lenders had predicted, and lending levels are expected to fall further to just £6 billion in the coming year.
There was also evidence that the mortgage market finished 2010 on the back foot, with net lending contracting by £298 million in December, as homeowners repaid more than lenders advanced, while the number of mortgages approved for house purchase fell to its lowest level since March 2009.
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