Mortgages...remember them?
Only joking; but these days, good mortgages seem about as rare as well mannered Premiership footballers!
It's clear that mortgage lenders are tightening their belts and trying to reduce the risks they have been exposed to by them lending mortgages that have been beyond people's ability to repay.
Now Abbey has become the first big mortgage lender to clamp down on low-cost interest only mortgages by reducing the maximum loan on such deals to as little as 50% loan to value (LTV).
In the last year or so, more and more of you have switched to interest only mortgages in order to meet the ever rising property prices.
Interest only mortgages are straightforward. The monthly payments you make only cover the interest on your mortgage. You will have to pay back the loan in full at the end of your mortgage term. To do this, you are normally required to take out some form of savings or investment vehicle in the form of an endowment, an ISA or a Personal Pension Plan.
In 2006 the Financial Services Authority (FSA) warned that thousands of you taking on this type of mortgage could be putting yourselves at risk of repossession because you had little or no idea of how you would pay it back.
Sadly, that seems to be coming true for a few of you.
If you are having trouble meeting your repayments or worried about repossession, you can speak free of charge to a debt adviser who can provide you with advice and solutions to help you resolve your problems.
If you are an interest-only borrower with "a proven repayment vehicle in place",
Abbey says you will be able to borrow up to 75% of a property's value, a reduction from 85%. If you cannot produce evidence of a repayment vehicle, you will be limited to 50%.
An Abbey spokesman explained their decision: "This reduces the risk to both the customer and to Abbey, and is prudent given ongoing market conditions".
- Nationwide wants bigger deposit
Nationwide now wants
a minimum deposit from new borrowers of 10% on all but two of its
mortgages. It has also halved its maximum loan to £500,000, little more than two weeks after reducing it to £1 million.
Nationwide also said new customers wanting to take out its standard variable-rate mortgage, which it calls its "base mortgage rate", will need a deposit of at least 25%, and that this deal will be available only to customers dealing directly with it.
It described the moves, which take effect from May 1, as "part of its ongoing approach of managing business in a prudent and sustainable way".
Nationwide is also reducing its maximum loan-to-value ratio from 95% to 90% on all mortgages for new borrowers except its 3 year fixed-rate mortgage and 3 year tracker mortgage, both available for those of you looking to borrow 95% of a property's value.
Nationwide's move fuels concern that 95% mortgages are now under threat; Cheltenham & Gloucester, Alliance & Leicester and Britannia are other mortgage lenders who have capped their maximum loans at 90%.
Halifax is one of the few lenders that still offer mortgages up to 95%, though it charges a higher rate for such loans. Only a few days ago, it increased some of its fixed rate and tracker mortgage rates by up to 0.6%.
Sean Gardner, at personal finance website MoneyExpert.com, summed up the recent moves by mortgage lenders:
"If you've not got a substantial deposit or equity in your house, then your choices are now severely limited. On average, if you are remortgaging you now need a deposit of 15.5% if you take out a fixed or variable mortgage."
But don't worry, as there are still some
competitive mortgage deals out there, especially if you use an
impartial adviser who can search all mortgage lenders, some you may never have heard of, to find the best deal for your situation.
So, do you think the mortgage squeeze is as bad as everyone is making out or is it all just scaremongering?
If so, why not let us know in the comments?