Posted: Tue Oct 09, 2007 10:08 am
Mortgage rejections set to soar
New restrictions on lending to high-risk customers could lead to a surge in the numbers of people seeing their mortgage applications turned down, new figures revealed today.
According to the new research from independent broker The Mortgage Lender, a quarter of all specialist and sub-prime mortgage applicants accepted in August would now be refused, following changes to lenders' rules.
Mortgage experts said the new tighter controls on Loan to Value (LTV) and credit history were likely to have a significant impact on low-income families or borrowers with a poor credit rating trying to get into the housing market.
"These figures certainly seem to suggest that the less well off are going to find it much harder to get their hands on a mortgage deal in future," said Ray Boulger, the senior technical manager at broker, John Charcol.
He said many first-time buyers would be priced out of the market while homeowners looking to remortgage on a sub-prime deal might find themselves unable to make the repayments.
Lisa Taylor, an analyst at Moneyfacts, said the new changes were likely to provoke a drop in the sub-prime market.
"It used to be that almost anyone who applied for a mortgage got one. But the lenders have realised belatedly that this is not sustainable. These changes were necessary but there will be a significant impact," she said.
The sub-prime market is worth about £130bn a year, including about £30bn in new mortgage deals. Brokers warned the narrowing in availability of sub-prime deals could have severe repercussions for the economy.
David Titmuss, managing director of The Mortgage Lender, said: "We believe that the potential impact upon the economy may be considerably more than most commentators have stated.
"More and more people will go into debt management and Individual Voluntary Arrangements (IVA). There will certainly be even more home repossessions and the overall result will be a fall in house prices as the money to buy them simply contracts."
Another survey published today revealed that about 5% of first-time buyers were leaving themselves vulnerable to a downturn in the housing market.
According to the financial website Fool.co.uk, about one in 20 new homeowners took out a 100% mortgage, meaning only a slight fall in the cost of property would push them into negative equity. David Kuo, head of personal finance at Fool.co.uk, said: "Borrowers on 100% mortgages need to be aware that stagnant house prices may keep them shackled to their uncompetitive lender and prisoners in their own home until house prices rise again."
Source: guardian.co.uk
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http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk
New restrictions on lending to high-risk customers could lead to a surge in the numbers of people seeing their mortgage applications turned down, new figures revealed today.
According to the new research from independent broker The Mortgage Lender, a quarter of all specialist and sub-prime mortgage applicants accepted in August would now be refused, following changes to lenders' rules.
Mortgage experts said the new tighter controls on Loan to Value (LTV) and credit history were likely to have a significant impact on low-income families or borrowers with a poor credit rating trying to get into the housing market.
"These figures certainly seem to suggest that the less well off are going to find it much harder to get their hands on a mortgage deal in future," said Ray Boulger, the senior technical manager at broker, John Charcol.
He said many first-time buyers would be priced out of the market while homeowners looking to remortgage on a sub-prime deal might find themselves unable to make the repayments.
Lisa Taylor, an analyst at Moneyfacts, said the new changes were likely to provoke a drop in the sub-prime market.
"It used to be that almost anyone who applied for a mortgage got one. But the lenders have realised belatedly that this is not sustainable. These changes were necessary but there will be a significant impact," she said.
The sub-prime market is worth about £130bn a year, including about £30bn in new mortgage deals. Brokers warned the narrowing in availability of sub-prime deals could have severe repercussions for the economy.
David Titmuss, managing director of The Mortgage Lender, said: "We believe that the potential impact upon the economy may be considerably more than most commentators have stated.
"More and more people will go into debt management and Individual Voluntary Arrangements (IVA). There will certainly be even more home repossessions and the overall result will be a fall in house prices as the money to buy them simply contracts."
Another survey published today revealed that about 5% of first-time buyers were leaving themselves vulnerable to a downturn in the housing market.
According to the financial website Fool.co.uk, about one in 20 new homeowners took out a 100% mortgage, meaning only a slight fall in the cost of property would push them into negative equity. David Kuo, head of personal finance at Fool.co.uk, said: "Borrowers on 100% mortgages need to be aware that stagnant house prices may keep them shackled to their uncompetitive lender and prisoners in their own home until house prices rise again."
Source: guardian.co.uk
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk