Remortgaging deals 'hard to come by'

20/11/2009

Brits currently attempting to remortgage are facing tough times, with lenders having become "extremely picky" about who they accept for credit.

Writing for the BBC, Brian Murphy of the Mortgage Advice Bureau said that the credit crunch had led to many mortgage firms changing their policies.

Simultaneously, the downturn in the housing market has diminished the amount of equity many homeowners hold in their properties.

This increases the size of the remortgage loan needed - diminishing the homeowners' chances of being accepted still further.

"Credit histories are now, more than ever, a crucial part of the lenders' decision-making processes, and poor credit scores are the biggest cause of rejected applications," Mr Murphy said.

"Even borrowers in a strong financial position, with large deposits or a lot of equity in their properties, are falling at the first hurdle."

The expert advised those homeowners looking for a new loan that they should "be prepared" in order to increase their chances of acceptance.

Tips offered by Mr Murphy included being sure to have six months of previous bank statements to hand in order to prove income.

Kevin Still, EuroDebt director, added: "With limited wholesale funds still available to the mortgage lenders they are being incredibly picky with regard to who they lend to because they can and are able to charge high rates above base in the current market with high arrangement fees. For people with financial problems the option of re-mortgaging is very limited. There are many that have considered downsizing or selling up and going into the rental market, but that is not really an option if you are in negative equity or the equity you have wouldn’t provide a deposit or cover the moving costs. With the prospect of increasing interest rates looming it is no surprise that many people are sitting tight.

"Measures to avoid re-possession where possible seem to be working and consumers seem to be focusing on reducing their unsecured debt burden where possible. There are, however, a large number of people still using credit cards to top up their household budget and they need to take stock and decide whether they need to take professional advice before the situation gets out of hand."

Tags; Housing Debt and Bills, Young Family Finances,

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