Author Topic: Easy mortgages are a thing of the past as home loans get harder.  (Read 7220 times)

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New Home Expert

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The days of easy mortgages are over.
The number of mortgage approvals in April was 63,000, down from 76,000 in January. 
Both numbers may seem high but the long-term average for mortgage approvals between 1997 and 2007 was nearer 99,000 a month.

The reduction could be due to the change of focus in the Funding for Lending Scheme away from domestic mortgages. It could also be a result of the more stringent questions borrowers are now asked when they apply after the Mortgage Market Review to ensure borrowers can afford the loans they need, even when interest rates go up.

In George Osborne's Mansion House speech last week, the Bank of England was reminded it is responsible for credit control - by demanding banks place restrictions on mortgages or require them to hold more capital.
This would mean that banks put caps on the amount lenders can borrow with the suggested four-times salary becoming a strict maximum to prevent borrowers over stretching themselves. 
Another control may be to limit the mortgage term to a maximum of 30 years.
In 2000 only 1.6% of borrowers had a mortgage term of 30 or more.  Today that figure is 28% as borrowers (and lenders) look to ways to make repayments more "affordable" over the longer term.

Will this affect house prices?  It should do. 
But according to estate agents Savills, cash buyers now account for 35% of UK property purchases.
The highest proportion ever - in 2007 only 25% were cash sales.
New cash buyers would do well to wait until after the market crashes!
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