Lenders adopt a conservative approach
According to a leading financial data provider, Moneyfacts, most banks are tightening their lending criteria, which is not good news for borrower and lender. Nearly dozen lenders have stopped offering 100% mortgages since last June, According to reports, Britannia building society and Alliance & Leicester - among Britain’s two major mortgage lenders - have already doubled the minimum deposit required by first-time buyers. Other lenders who have slashed maximum loans comprise Manchester building society and Egg, Yorkshire building society.
According to mortgage analyst David Knight, it is not difficult to follow why such pattern has emerged. It’s largely owing to the growing number of borrowers having debt problems coupled with mellowed housing prices. As a result, things are not going to be easy for the consumers with a small amount of equity.
The more cautious approach on part of lenders, leading to cut down bigger exposure to the fluctuations of property price, point to their concern over the uncertain future of the hazy UK housing market. Knight believes that it’s not only first-time buyers who are going to get hurt by lower LTV limits. He has stated: “If such conservative approach continues, borrowers who are near to closing a deal but are forced to borrow at a rather high ‘loan-to-value’ ratio could see the choice of deals getting limited, or may be asked to pay a much steeper price.”