Mortgage financing 'still very tight'

19/01/2009

Further falls in house prices will make it difficult for many homeowners to secure remortgaging deals, brokers have indicated.

A general tightening-up of credit criteria from banks caught up in the current financial crisis and economic downturn is set to put the squeeze on loan deals, the Sunday Times reports.

Falling house prices are likely to put thousands more people into negative equity - where the size of the mortgage is bigger than the value of the property.

More generally, the decline will lessen loan-to-value (LTV) ratios for mortgage holders, making access to attractively-priced deals more difficult.

Rising unemployment provides a third potential flashpoint, with reduced income expectations stemming from job loss making it more likely that a loan firm will turn a customer away.

Speaking to the newspaper, Ray Boulger at mortgage broker John Charcol said: "Borrowers who suffer a fall in income this year will really struggle to remortgage or find a new deal.

"Some lenders will turn these borrowers away; others will offer interest rates that are so uncompetitive that it is hardly worthwhile."

David Hollingworth at rival broker London & Country added: "Homeowners who need to find a new deal above 75 per cent LTV face a considerable rise in monthly mortgage repayments, if they can find a deal at all."

House prices have fallen by around 16 per cent over the past year, figures from lenders Halifax and Nationwide have shown.

Tags; Housing Debt and Bills, Young Family Finances,

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