Mortgages

Property values are falling but it is still very difficult to get a mortgage, this is a bit of a dilema for first time buyers especially, it couldn't be a better time to buy, but the finance is no longer available as easily as it was a year ago. Buyers are hoping that the house prices will remain low even when the mortgages become more available.

But will that happen? Borrowing from a lender isn't as simple as it sounds.

For house prices to remain low, demand will have to remain low, for mortgages to become more available the lenders will have to become more secure than they are at the moment, but due to events over the past year they mostly appear to be going through a period of consolidation and reducing risk in the sub prime market place and are cautious in all areas regardless.

While lending rates between banks and financial institutions may now be at record lows these organisations are not necessarily reflecting the lower rates in new lending packages or mortgages and are instead using this period to rebuild cash reserves for the future. This is good business for the lenders but it is bad news for the borrower even when house prices are so low.

Price crashes are severely affecting how much lenders will lend as a percentage of loan to value or LTV.

LTVs are typically now down to 75% and even 65% with lenders who will actually lend, a lot of lenders have now withdrawn mortgage deals. This can be down to a number of reasons, one of the key factors is to ensure that if the lendee defaults and the house needs to be reposessed, the lender needs to be sure that they can recover the value of the loan when they sell the property at a property auction. With a falling market only lending 65% of the purchase price of a property gives a lender some security that they can recover what they lend.