subject: Why Remortgage, Mortgage And Secured Loan Applications Have Fallen. [print this page] The price of properties has fallen drastically since the advent of the credit crunch.
The main effect was found in the mortgage and secured loan markets.
Secured home loans require the security of the bricks and mortar value of a property, and they depend to a large extent on property value.
In addition to property prices decreasing the number of secured loans and remortgages available, the underwriting criteria of mortgage and secured loan lenders tightened, further limiting the eligibility of many.
Prior to the credit crunch and with home prices going up, underwriting in the mortgage and secured loan markets was less strict.
There was ready availability of secured loans at 90% LTV , 95% LTV,100% and even the 125% equity plan whereby it was possible to borrow up to 25% more than the property was actually worth.
Similarly with mortgages and remortgaes it was possible to obtain a mortgage or a remortgage up to 100% of the property value.
Mortgages and remortgages were available from The Northern Rock at up to 125% of the value of the property.
This meant that apart from property prices continully rising, with underwriting and loan to values being very liberal, many more people up to three years ago were able to obtain a secured loan, mortgage or remortgage then than now.
On a 125% mortgage or remortgage, if a property was worth say At 200,000 you could add50,000 to this value making it possible to obtain a mortgage or remortgage of up to 250,000.
The recession has lead to secured loan lenders limiting LTVs for self employed and employed applicants to 70% and 80% respectively.
At the same time loan to values became much more restricted in the mortgage and remortgage sectors with no products available at over 90% 90% It was even only a small percentage of mortgage lenders prepared to lend at over 80% LTV.
It became very difficult for would be first time buyers to get a foot on the housing ladder as loan to values became restricted to a maximum 75%.
25% deposit is a considerable sum for people to have to hand. Even for a cheap property costing 100,000 a prospective buyer would need in the region of 28,000 for the deposit, legal fees, valuation fees etc.
There used to be 95% loan to value first time buyere mortgages available.
When one is buying a first property there is also the no small matter of carpets, flooring, furniture, lighting, bed linen, cutlery, etc. etc. to be taken into consideration.
Therefore to move into a first bought home you are talking about requiring well well over It is extremely difficult for an individual to save up 30,000.
The underwriting being so much tighter coupled with the fall in property prices have had a cippling effect on the secured loan, mortgage and remortgage sectors.
by: Liz Moir
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