Lenders are reported to have struggled to deal with a flood of applications from first-time buyers. If buyers are unable to climb on to the housing ladder, or even move up with their next purchase, this could reduce demand and exacerbate any fall in prices.
Most banks have stopped deals with a 10% deposit, the industry fears a sharp fall in house prices and now HSBC is the only high street bank offering mortgages with a loan-to-value ratio above 90%. These deals are limited in number each day, and certainly from our experience are incredibly difficult to acquire. It may be recommended that the client attempts to go direct to HSBC to try themselves.
Why are Banks increasing the deposits buyers need?
Banks are withdrawing lower deposits due to fears they will lose money on mortgages if prices plummet and repossessions do not cover the money lent. They are basically asking customers to put more ‘skin in the game’ to mitigate their exposure to loss.
What is availability of products?
Banks are now squeezing out borrowers who can stump up only a 15% deposit for a home, data shows. The number of mortgage deals available to borrowers with a 15% deposit has almost halved from 664 to 357 since March, according to analyst Moneyfacts.
Even deals requiring a deposit of 20% have fallen from 714 to 571. The crunch comes amid fears of a house price crash, which could limit the money banks can recoup if they need to repossess homes.
TSB has become the first big lender to axe their deals on all home purchase, remortgage and shared ownership products with a loan-to-value ratio of 85%.
What about House Prices?
Nationwide Building Society has predicted house prices could fall by 14% in 2020. Currently we have not seen a big drop in prices due to the limited supply of properties which seems to be propping up the prices at the moment.