27 January 2009

Mortgage Rationing?

So, it’s official! The UK is in a recession for the first time since 1991, although the reality is that most of us have known the downturn has been gathering pace since early 2008. However, that didn’t stop a Government owned bank, Northern Rock, paying staff a reported £9m in bonuses last week! Enough said!
Following the recent £50bn government rescue plan attracting less than welcoming consequences in the stock market, shares fell. RBS required further investment from HMG (who now own circa 70%) and shares in Lloyds Banking Group (the new name for HBOS and Lloyds TSB) also plummeted.
A week for bad news continued with the FSA reporting that possession orders agreed by the courts were up 92% in the last quarter of 2008 and those who were up to 3 months behind on their mortgage payments increased by 24%, compared to the same periods in 2007.
Those who have been in the mortgage industry for some time are starting to compare the current situation to the 80s when customers had to ‘queue’ to be approved for a mortgage and even then you would only get a mortgage if you had a superb relationship with your bank/building society manager along with savings accounts already with them! This was sometimes known as rationing and some pundits are questioning if that is where we are heading in 2009? The signs would appear to be pointing us that way. If you had a 5% deposit in Feb 2008, there were some 1,100 mortgage products available to you. Today, there are less than 5, with numerous conditions attached! A 10% deposit attracted 1,200 products early 2008 yet today there are less than 20! Conversely however, if you have a 30% to 40% deposit available then the product offerings are fantastic!
The stark reality is that, if you can, there’s probably no better time to purchase a property with house prices and interest rates as low as they are. But be advised, in order to avoid having to ‘queue’ to obtain a mortgage, it might be sensible to talk to a professional advisor who can review the whole market for you and seek out a product best suited to your specific needs and requirements, be it a new purchase, re-mortgage or for investment purposes.

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