Are 100% mortgages gone forever?

May 14th, 2009 by writer | No Comments | Filed in Press Releases

Major United Kingdom lending institution Abbey Mortgages has once again stated its position that deposits for house mortgages will not decrease to a level below 10%. Even the most financially secure clients are being refused 5% down loans. This is in no way due to the financial status of borrower. Actually most bank customers currently applying for home mortgages are more solvent than ever. It seems the recent economic downturn has created a world of haves and have-nots as far as borrowing is concerned. No, the reason we are not likely to ever see the return of wildly popular 100% mortgages is due to the instability of the real estate values. It is hardly reasonable for any lender to advance funds on a 100,000-pound property with zero down when the property may easily depreciate in value by 20 percent in the following year. Credit Choices, a leading UK consumer credit watchdog reports that a clients ability to repay has become secondary to the risk of asset devaluation. Credit Choices further notes that the key to securing a low deposit loan at favourable terms continues to be application to many lenders. Indeed many smaller UK banks are less vested in questionable assets and hence place greater value on qualifying income. In short, when a lender does not approve a loan these days it is often because they simply do not have the money to lend. They must limit risk to only those transactions they can resell to stronger financial institutions.

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Banks Return from 100% Mortgages Holiday

April 7th, 2009 by writer | No Comments | Filed in General News

It is hard to believe that just two years ago house prices were zooming upward and attaining financing for home purchases was a simple matter. Credit was loose and mortgages were so available that lenders such as Abbey mortgages offered what amounted to 100% loans. These 100% mortgages allowed buyers to purchase homes paying absolutely no deposit. Just sign on the dotted line as it is said and you were ready to move in.

So why did we suddenly find ourselves facing millions of home repossessions? People ran out of money. Once the nation’s lenders extended so much easy credit that it became impossible for people to repay, the banks quickly sought to cut losses by shutting down avenues of credit. In this case the first item on the credit crunch agenda was home mortgages. As such lenders not only stopped dealing in questionable loans such as 100% mortgages, many lenders stopped issuing mortgages altogether. They, the banks, had no choice as these large banks had passed their bad notes upward until banking institutions at the highest level (read as Royal Bank of Scotland) were cash poor.

Consumer assistance website, Credit Choices reports that stronger banks are now once again releasing their death-grip on their purse strings and homebuyers with 10 to 20 percent can once again finance their housing. One of the first major UK finance arms to restart the flow of credit via mortgages is Abbey Mortgages. Home sales rank second only to new car sales as essential to the British economy. When people begin to purchase either of these big-ticket items jobs are created and everyone once again begins to prosper.

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Mortgage Protection Is More Important Without 100% Mortgages

March 18th, 2009 by writer | No Comments | Filed in Press Releases

The recent economic downturn has made banks around the world tighten their grip on lending. If anyone wishes to purchase a new house today they had better plan on scrounging up at least a ten percent deposit. The days of 100% mortgages are gone forever. No doubt as financial instruments tied to indexes raised rates to the point where homeowners faced repossession many banks were left with customers opting to walk away from their houses and the attached debt. False highs on home prices means that these debts will never be recovered and that lenders will write off huge losses.

Consumers will need to pay these large deposits so that banks feel that buyers have too large a vested interest to leave behind. And new homebuyers will want to be sure that they can meet the monthly due on their house. With as much as 20% of the house value invested, early buyers can’t afford to find themselves unable to meet the payments. Credit Choices, a United Kingdom consumer finance consultation website reports that mortgage protection is being sought after as a stopgap plan to cover one’s personal housing investment. In other times mortgage protection was used as a measure to cover in the event of injury or illness. It covers ones house payment for one year in the event of either. Today the primary reason people purchase mortgage protection is so that in the event they are made redundant that important portion of their monthly bills will be paid.

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100% Mortgages – What Are They, And Why Did They Vanish?

February 12th, 2009 by admin | No Comments | Filed in Press Releases

100% mortgages used to be one of the most popular home loans, due to many first time buyers seeking a loan for 100% – or even 100% of the value of their property. This was usually to allow buyers to afford new furniture, cover solicitors fees etc.

100% mortgages have always been viewed as a high risk mortgage, when compared with a standard mortgage for a smaller percentage of the value of a given property. The seemingly worldwide crunch on credit caused the withdrawal of 100% mortgages from just about every mortgage lender, certainly in the UK.

Part of the reason for the withdrawal of this kind of mortgage offer may be, in part, fear of borrowers ending up in negative equity. Negative equity is a term used to describe the situation whereby a borrowers house has been devalued due to a drop in house prices, causing the remaining mortgage to be higher than the value of the house. Obviously, by definition, a 110% mortgage would leave a borrower in negative equity, but in prosperous times this is not really a concern if the borrower has a good income, and house prices are (as usual) set to raise, thus putting the borrower into positive equity.

For those looking to take out a loan of any type, but especially a secured loan, it would be advisable to do your sums before applying for credit. Using tools like a savings calculator can be helpful for standard loans, and a mortgage calculator for home secured loans.

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Mortgage Calculator and 100% Mortgages

January 10th, 2009 by admin | No Comments | Filed in Press Releases

Until very recently, 100% mortgages were more than common. Given house prices in the UK, most first time buyers, typically young couples, would be looking to 100% or even 110% mortgages that would allow them to purchase their desired property and be able to do any necessary renovations or buy the white goods many of us take for granted.
 
Although not trespassing too heavily on the sub-prime market, 100% mortgages were, and still are viewed as a more high risk proposition than a mortgage where the borrower has a larger equity stake. And, while the global recession is certainly having a cooling effect on the house price index, using the tradional- thrice your earnings mortgage sums, means that a mortgage is simply beyond the reach of a depressingly large percentage of the population.
 
So, it has been shown that the laisez faire approach leads the greedy to excess and the unwitting to unsustainable debt, it seems after a quiet christmas the watchword for the new year is caution. While many said that the banks wouldn’t be lending this year, they will. The governmet loans- read tax money- to keep the banks solvent were handed out on the understanding that funds would be available to those in need. Though, perhaps more importantly, as the major financial institutions make money from their loans, if they stop lending then their balance sheet starts to look precarious and secidedly unsustainable as a business model.
 
Though caution is not the prerogative of the financial powerhouses. It’s quite understandable that those with significant financial obligations are looking far more closely at the affordability of their lifestyles. And, while being cash-strapped is never a desirable situation; if it pushes more people to greater financial responsibility then once the worst of the recession is over, finance may be more stable. This can already be seen if you look to those who are buying houses in 2009- find the house, price it, run it through a mortgage calculator and if the numbers look good, then seek the loan. A better proposition than the buy-now-worry-later tendencies we were getting so used to.
 
 
 
 
 
 
 
 
 
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100% Mortgages An Introduction…

December 21st, 2008 by admin | No Comments | Filed in Press Releases

100% mortgages
 
Although now defunct, 100% mortgages used to be popular with 1st time buyers, offering a loan for the complete value of the property. Mortgage repayment rates for 100% mortgages tended to be higher than pretty much all other mortgages, but borrowers were made to understand that this was due, in part, to the extra risk on the part of the lender.
 
As well as the 100% mortgage, some lenders even offered to lend up to 125% of the value of the property, so the house buyer could purchase household goods, as well as pay for things like solicitors fees and valuations.
 
Back in 2006, roughly 2 percent of all mortgages were 100% ones. (Sourced from the Council of Mortgage Lenders)
 

Are 100% Mortgages Still Available?


 
In a word, No. the credit crunch has closed the door on 100% mortgages. Whether this is a long term thing, or just a temporary issues whilst the powers at be sort out the housing market and other issues, we do not yet know. Some people say we will see a return to 100% mortgages, whilst others are more sceptical.
The reason 100% mortgages are no longer available is pretty simple. Mortgage providers rely on borrowing money from other lenders at very competitive rates, who in turn rely on house prices rising steadily. Since October ’07, there has been a slump in house prices, to the extent that 1 year later, in October ’08, house prices were lower than 2007.
 
This has left some mortgages holders in ‘Negative Equity’ – a term used to describe having a mortgage debt that is higher than the value of your property.
If you came here looking for a 100% mortgage, do not despair. It would be wise to use a mortgage calculator to work out what you can or can’t afford, and what deal would be best for you.
 

Mortgage Calculators – What Are They?


 
A mortgage calculator is basically a tool that can be used to determine what your monthly repayments should be for any given mortgage. Some of the best mortgage calculators allow you to input the sum to be borrowed, the % rate that you have been offered, and the repayment period. The calculator will then give you details such as your monthly repayment amount, the total cost of the mortgage, and even the total interest paid for the mortgage.
 
It may be surprising what you find when you use one of these tools to work out how good the mortgage you are being offered really is – Seeing the figures in black and white in front of you in a concise table can really clear the fog somewhat.
 

About Credit Choices.


 
Creditchoices are a leading comparison site for finance matters. On their site you can compare everything from abbey mortgages to instant decision credit cards, and much more.
 
Creditchoices also have a plethora of facts and guides, in an effort to educate the consumer, so they can make informed and sensible decisions when looking for credit.
 
 
 
 
 
 

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