| The
price of properties has fallen drastically since the advent
of the credit crunch.
The main
effect was found in the mortgage and secured loan markets.
Secured
home loans require the security of the bricks and mortar value
of a property, and they depend to a large extent on property
value.
In addition
to property prices decreasing the number of secured loans
and remortgages available, the underwriting criteria of mortgage
and secured loan lenders tightened, further limiting the eligibility
of many.
Prior
to the credit crunch and with home prices going up, underwriting
in the mortgage and secured loan markets was less strict.
There
was ready availability of secured loans at 90% LTV, 95% LTV,
100% and even the 125% equity plan whereby it was possible
to borrow up to 25% more than the property was actually worth.
Similarly
with mortgages and remortgages it was possible to obtain a
mortgage or a remortgage up to 100% of the property value.
Mortgages
and remortgages were available from The Northern Rock at up
to 125% of the value of the property.
This meant
that apart from property prices continually rising, with underwriting
and loan to values being very liberal, many more people up
to three years ago were able to obtain a secured loan, mortgage
or remortgage then than now.
On a 125%
mortgage or remortgage, if a property was worth say at £200,000
you could add 50,000 to this value making it possible to obtain
a mortgage or remortgage of up to £250,000.
The recession
has lead to secured loan lenders limiting LTVs for self employed
and employed applicants to 70% and 80% respectively.
At the
same time loan to values became much more restricted in the
mortgage and remortgage sectors with no products available
at over 90% 90% It was even only a small percentage of mortgage
lenders prepared to lend at over 80% LTV.
It became
very difficult for would be first time buyers to get a foot
on the housing ladder as loan to values became restricted
to a maximum 75%.
25% deposit
is a considerable sum for people to have to hand. Even for
a cheap property costing £100,000 a prospective buyer
would need in the region of £28,000 for the deposit,
legal fees, valuation fees etc.
There
used to be 95% loan to value first time buyer mortgages available.
When one
is buying a first property there is also the no small matter
of carpets, flooring, furniture, lighting, bed linen, cutlery,
etc. etc. to be taken into consideration.
The underwriting
being so much tighter coupled with the fall in property prices
have had a crippling effect on the secured loan, mortgage
and remortgage sectors.
|
