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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