Mortgage woes worsen

In another blow to house affordability, 11 major UK banks and building societies have cut their maximum lending amounts, a significant reversal of their previous lending practices.

[ClickPress, Mon Jan 21 2008] In another blow to house affordability, 11 major UK banks and building societies have cut their maximum lending amounts, a significant reversal of their previous lending practices.

Alliance & Leicester, Scottish Widows Bank, Barnsley Building Society, Britannia Building Society, Egg and Pi have cut their maximum loan amounts on several of their products, from 95% to 90% of a property’s value. The Cumberland and the Yorkshire building societies have stopped offering 100% mortgages, while Newcastle Building Society, among others, will only offer such loans when the borrower is backed by a guarantor.

Since December, the 11 lenders have cut their maximum loan-to-value (LTV) on at least some of their products.

Combined with other negative indicators of the market, such as an almost stagnant growth rate in house prices and increasing levels of debt faced by many, this signals more bad news for borrowers, especially those with a small amount of equity.

Furthermore, borrowers cannot expect an automatic reduction in mortgage rates on the back of cuts in the base rate by the Bank of England. Although the Prime Minister said last week that lenders had a “duty” to pass on interest rate cuts to borrowers, hundreds of thousands of borrowers are still paying over the odds after the base rate cut in December. The Council of Mortgage Lenders (CML) warned that lenders were under no obligation to link their mortgage rates with the base rate.

The Financial Services Authority (FSA) recently expressed fears that despite the anticipated base rate cuts, up to 1.4 million homeowners could struggle this year when their fixed-rate deals come to an end. As the effects of the credit crunch see lenders tighten their lending criteria, it will be more difficult than ever for those borrowers to get favourable deals. “The best thing homeowners facing remortgaging can do”, advised Lawrence Smith of Decision Homebuyers, “is to talk to their lenders well before their current mortgage ends and find the best deal – times are tough for borrowers right now but there are still many options available.”



For press enquiries, please contact Phil Rendall on 020 7099 9026
Email: phil@dhbuyers.co.uk
Web: www.decisionhomebuyers.co.uk

News provided by Decision Homebuyers, a leading UK property company providing a quick and simple solution for selling your home, no matter what the condition.

Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.

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