Financial News

• Brown dismisses housing crisis fears (09 04 2008 10:15)
• Mortgage hope offered by bank (09 04 2008 10:15)
• Consumer morale 'falls again' (09 04 2008 10:15)
• Bristol & West withdraws deals (09 04 2008 10:15)
• Retirees feel 'unhappy due to no longer working' (09 04 2008 10:15)
• Severn Trent to be fined £36m (08 04 2008 04:15)
• Brown to announce first time buyers help (08 04 2008 04:15)
• UK bank details 'for sale by thieves' (08 04 2008 04:15)
• Last 100% mortgage to disappear (08 04 2008 04:15)
• High earners 'shut out of market' (08 04 2008 04:15)

Subscribe!

Savills: Price slowdown caused 100% mortgage withdrawal

Homeowners could find it difficult to remortgage in future due to market slowdown, Savills Private Finance claims.

The comments come in the wake of many lenders withdrawing their deposit-free 100 per cent loan-to-value (LTV) mortgages from the market.

These products - aimed at borrowers who do not have enough savings to put down an initial deposit - represent a higher risk to lenders.

In the currently unfavourable economic climate caused by the credit crunch, which has triggered a slowdown in house price inflation, firms have taken their 100 per cent LTV products off the market.

Indeed, 125 per cent mortgages - combining 100 per cent of the property's value with an extra 25 per cent of credit in the form of a personal loan - are no longer available in the UK.

Mortgage broker at Savills Melanie Biens explained that lenders' fear of a housing market slowdown is key to the products' withdrawal.

Speaking to the Reuters news agency, she said: "When there's double-digit house-price growth, it doesn't matter so much if you take on a relatively high LTV, because by the time you come to re-mortgage, your LTV will have effectively fallen because you will have more equity in your home.

"But if you borrow the full amount or more than the value of your home and house prices don't rise, or - even worse - fall, you could have even more negative equity when you come to re-mortgage and if fewer lenders will look at this sort of business, you could be in trouble."

Send this article to: