2012 has begun positively, notes Terry McCutcheon, CEO of the Finance Planning Group
We haven’t seen too many high loan-to-value mortgages around for the past couple of years, but it looks they may well be making a comeback. Moneyfacts reported that there are 49 currently available at 95% LTV, compared to 24 in January last year and a paltry four in April 2009. There are also a further 280 deals on offer at 90% LTV. This is very encouraging and will certainly be welcome news for potential first-time buyers who have been slogging it out trying to save deposits with some of the worst savings rates around that I can remember.
Let’s face it, the odds have been stacked against someone who wants to get on the first rung of the property ladder, or indeed a previous homeowner who wants to get back in the market. Many people are not terribly good at saving significant amounts of money over longer periods of time. Add to that the pitiful returns that savings accounts have been offering and it has all looked rather bleak.
The naysayers will see the return of low deposit mortgages as a return to the riskier times which caused the crash in the first place. But the plight of homeowners is more to do with sub-prime borrowers in the US and unscrupulous investment banks, not because people didn’t have enough equity in their homes. Negative equity has not proved to be a widespread problem in this recession.
Equity and affordability are too very different things. We have seen many borrowers who could afford the ongoing monthly mortgage payments on a property but just can’t pull together a 40% deposit.
So, it’s better news but borrowers need to move relatively quickly. Moneyfacts says that these deals are around for 27 days in general, below the 30 day average.
Now is the time for first-time buyers to act, given the weakening economic backdrop and the potential affect that this may have on lenders’ criteria. Let us also not forget that the stamp duty holiday ends towards the end of March, which suggests that what we have now is a little window of opportunity.
The restriction on the availability of mortgages to first-time buyers has been a more fundamental issue than the cost of stamp duty, so the removal of this stamp duty holiday is not going to have a significant negative impact. The ability to access credit is far more important. However, it might well serve as a useful hook to contact potential clients and focus their minds somewhat over the coming weeks.
Naturally, the other fundamental issue, and one that we can’t do anything about, is the restriction in the number of properties for sale. A study carried out by Rightmove has found that while would-be property buyers are scouring the internet for good deals, few sellers are coming to market. Estate agents are now marketing less than one new property per week, while prices have risen by 1.4%.
So, the shortage of sellers is underpinning prices, but hopefully the pent-up demand from buyers is starting to loosen. Even the Bank of England, in its ‘Trends in Lending’ report, says “lenders expect the availability of secured credit to households to increase slightly in 2012 Q1