Homebuyers may have to put down 15 percent of property value
April 9, 2009 by admin
Filed under News, News-Mortgages
It has been revealed that the homebuyers of the future in the UK may have to put down a deposit of at least 15 percent of the property value, which means that an increasing number of people may find themselves priced out of the market because they do not have the deposit level that is being demanded.
The move to increase deposits to a minimum 15 percent could now come as a result of radical reforms planned by the head of the Financial Services Authority, which is the UK’s financial regulator.
The possible new regulation is a far cry from the mortgage levels available just a couple of years ago, where many buyers would have no problem getting a mortgage for 100 percent or even 125 percent of the value of the property that they were buying.
However, these low deposit or no deposit mortgages are now a thing of the past, and it appears that the traditional 5 percent mortgage and even 10 percent mortgages could be heading the same way if these reforms come to fruition.
The chairman of the Financial Services Authority, Lord Turner, is looking towards banning mortgage loans that are for close to the full amount of the property value, and this means that banks may only be able to lend up to 85 percent of the property value if the reforms go ahead, which of course means a deposit of at least 15 percent from the buyer.
Many lenders have already put this sort of lending level in place, however, due to the effects of the credit crunch, and many will only offer competitive mortgages to those that are willing to put down a higher deposit, in some cases up to 40 percent of the property value, to minimise on risk.
