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Mortgage lenders ease loan restrictions | Mortgage lenders ease loan restrictions |
(7 days later) | |
The proportion of mortgage deals needing more than a 25% deposit has fallen to a two-year low. | The proportion of mortgage deals needing more than a 25% deposit has fallen to a two-year low. |
Moneyfacts says only 46% of mortgages currently on offer now ask for a deposit of that size. | Moneyfacts says only 46% of mortgages currently on offer now ask for a deposit of that size. |
The figures indicate that some lenders may be relaxing their strict mortgage rationing of the past two years. | The figures indicate that some lenders may be relaxing their strict mortgage rationing of the past two years. |
However lenders have warned that they still face severe restrictions on their ability to lend to home buyers. | However lenders have warned that they still face severe restrictions on their ability to lend to home buyers. |
Less demanding | Less demanding |
At the beginning of this month the percentage of new mortgage deals that demanded at least a 25% down payment fell below 50% for the first time in exactly two years. | At the beginning of this month the percentage of new mortgage deals that demanded at least a 25% down payment fell below 50% for the first time in exactly two years. |
However Michelle Slade of Moneyfacts pointed out that the size of a deposit is no longer the only method which lenders use to allocate mortgage funds. | However Michelle Slade of Moneyfacts pointed out that the size of a deposit is no longer the only method which lenders use to allocate mortgage funds. |
"The availability of mortgages continues to improve and encouragingly its those for borrowers with a smaller deposit that are seeing the biggest increase in numbers," she said. | "The availability of mortgages continues to improve and encouragingly its those for borrowers with a smaller deposit that are seeing the biggest increase in numbers," she said. |
"However, just because lenders have increased the number of deals available, it doesn't mean that more mortgages are being approved. | "However, just because lenders have increased the number of deals available, it doesn't mean that more mortgages are being approved. |
"In fact latest figures from the Bank of England show another drop in the number of approvals [in December 2010]," she added. | "In fact latest figures from the Bank of England show another drop in the number of approvals [in December 2010]," she added. |
The Council of Mortgage Lenders (CML) pointed out that UK banks and other mortgage lenders still had to repay £230bn of emergency state funding advanced to them by the Treasury and the Bank of England during the banking crisis of 2008 and 2009. | The Council of Mortgage Lenders (CML) pointed out that UK banks and other mortgage lenders still had to repay £230bn of emergency state funding advanced to them by the Treasury and the Bank of England during the banking crisis of 2008 and 2009. |
Along with having to repay loans to commercial lenders, this means there is little prospect of making more money available to prospective borrowers. | Along with having to repay loans to commercial lenders, this means there is little prospect of making more money available to prospective borrowers. |
"The shortage of mortgage funding has left the UK with a dysfunctional market, with restricted choice and competition, particularly for higher-risk customers," said the Council of Mortgage Lenders (CML). | "The shortage of mortgage funding has left the UK with a dysfunctional market, with restricted choice and competition, particularly for higher-risk customers," said the Council of Mortgage Lenders (CML). |
'Second steppers' | 'Second steppers' |
Separate research from Lloyds bank suggests that falling house prices will continue to choke activity in the market. | Separate research from Lloyds bank suggests that falling house prices will continue to choke activity in the market. |
The bank says nearly a fifth of first-time owners did not have enough equity in their properties to move. | The bank says nearly a fifth of first-time owners did not have enough equity in their properties to move. |
Research among its own mortgage customers by Lloyds, which owns the Halifax mortgage lender, found that 9% of so-called "second steppers" - those who want to sell their first home and move up the property ladder - are unable to do so because house prices have fallen since they first bought. | Research among its own mortgage customers by Lloyds, which owns the Halifax mortgage lender, found that 9% of so-called "second steppers" - those who want to sell their first home and move up the property ladder - are unable to do so because house prices have fallen since they first bought. |
The bank estimates that 9% of these second steppers are in negative equity, while a further 9% have less than 10% equity in their homes, hindering their ability to borrow a larger mortgage and move to a bigger home. | The bank estimates that 9% of these second steppers are in negative equity, while a further 9% have less than 10% equity in their homes, hindering their ability to borrow a larger mortgage and move to a bigger home. |
When Lloyds quizzed a sample of 500 of its borrowers who had bought their first home in the past five years, only 13% said they would cut their asking price if they could not sell for the amount they were currently asking. | When Lloyds quizzed a sample of 500 of its borrowers who had bought their first home in the past five years, only 13% said they would cut their asking price if they could not sell for the amount they were currently asking. |
"Without movement from second steppers, movement on the ladder comes to a standstill," said Lloyds. | "Without movement from second steppers, movement on the ladder comes to a standstill," said Lloyds. |
"For many, a necessary move to enable them to start a family or re-locate with work is held back by an erosion of equity and a widening gap between the cost of a first-time buyer and second step property," it added. | "For many, a necessary move to enable them to start a family or re-locate with work is held back by an erosion of equity and a widening gap between the cost of a first-time buyer and second step property," it added. |