ROOF Blog

For first-time buyers and remortgagers just getting a mortgage remains difficult, however. The moneyextra.com mortgage index showed that lending to first-time buyers with deposits of less than 5 per cent was non-existent while the supply of borrowing for those with 10 per cent cash to put down has decreased by 84 per cent compared to the same time last year. For first-time buyers the average loan to value was 71 per cent, compared with 82 per cent last year, while for people looking to re-mortgage the average loan to value ratio was 69 per cent compared to 82 per cent last year.

Halifax has been accused of undervaluing customers’ properties when remortgaging, forcing them into more expensive deals. Mortgage brokers say borrowers who took out cheap two-year deals just before the credit crunch in 2007 may see as much as 40 per cent wiped off the value of their homes. Other lenders are also coming under fire for not allowing customers to switch to cheaper fixed rate loans even if they pay a penalty.

The number of mortgage approvals slumped to a new record low in January when just 23,400 loans were taken out – 28 per cent lower than in December and 52 per cent down in year-on-year figures. The Council of Mortgage Lenders (CML) said there was a slight increase in the number of people remortgaging, up 8 per cent from December, but well down annually, and it expected demand for remortgaging to remain weak this year. Only 8,900 first-time buyers took out loans during the month – the lowest level since CML records began in 2002, and down from 54,100 at its peak in June 2002.

The government has confirmed that Northern Rock will revive its mortgage lending, with new loans worth up to £14 billion becoming available by 2011. The loans will be financed by money from new deposits, repayments of existing loans, and more government money, as part of a wider move to restructure the nationalised lender. The bank says it will offer ‘responsible’ loans for first-time buyers and customers who are remortgaging. A spokesperson said that mortgage would be lent at up to 90 per cent of the value of the property being bought.

Coventry building society has become the first lender to offer re-mortgage deals worth 100 per cent of a property’s value to customers in negative equity. Customers who took out loans of up to 125 per cent who are coming to an end of their mortgage deal can now get a five-year fixed rate deal worth 100 per cent of a property’s loan-to-value, with no booking or arrangement fees.

The high interest rates being charged to people with less than 25 per cent equity in their properties is pricing homeowners out of the remortgage market, new figures show. Moneyfacts said borrowers are better off staying on the standard variable rate when their current mortgage ends rather than remortgaging.

Researchers at Durham University have found many homeowners are remortgaging their homes for cash to supplement their day-to-day expenditure. The researchers looked at the spending patterns of more than 8,000 families from 2001 to 2005 and found a third of people used the cash released by equity in their homes for ‘other specified reasons’, ie as a form of ‘self-administered welfare’ rather than on luxuries or home improvements. A spokesperson said that the clampdown on lending by banks and the collapse in property values was a welfare disaster for struggling households.