Many home owners looking to move will face difficulties securing a new home mover mortgage, even from their current lender.
The main factors affecting current mortgage availability stem from the lending problems faced by lenders over the last few years. Prior to 2007 many lenders offered mortgages which represented a high proportion of the house value, and in some cases 100% loans were available. Unfortunately lenders lost money on a large number of these loans as the credit crunch caused many borrowers to have financial problems.
Additionally many mortgages were arranged on an ‘interest only’ basis meaning the debts have not reduced. Add to this the fact that lenders gave mortgages to many who could barely afford them anyway, and you have a recipe for major problems for the lenders.
So lending criteria has tightened up for home mover mortgages – a lot. Lenders want to avoid what they see as ‘risky’ mortgage lending and have taken steps to avoid taking on such business. These are some of the problems restrictive lending policies causes those wishing to move:
- Lending risk (the risk being that of a lender possibly losing money) is reduced if the borrower can put down a large deposit. This is not easy, especially for those who borrowed a high proportion of their current home, and prices have fallen since meaning there is not much equity left in the property. If you fancy a nice new-build flat or apartment, you will need around 20% or more for a deposit
- Even though house prices have been rising in recent years there is always the possibility the house you buy will be worth less than you paid for it when you come to sell next time around. If prices were to stagnate or fall going forward, you need to be sure that the property you buy now would still be suitable for you if moving became difficult in the future
- The Financial Conduct Authority (FCA), who regulates the market, insists lenders are more prudent in the amounts they lend. So they now lend less than they used to for any given incomes
- The FCA has also restricted lending on an interest only basis, whereby no capital is payable off the loan. Whilst this is not necessarily a bad thing, preventing the storing up of problems for later, it means that many, especially slightly older borrowers, cannot afford the full capital and interest repayments. If you cannot prove that you have decent pension provision, it may not be possible to get a mortgage beyond normal state retirement age and this can restrict the term (and push up the cost) for your new mortgage.
- Anyone with a less than exemplary financial record will struggle even more. The specialist lenders who would previously consider those with an adverse credit history have all but disappeared from the market, and many mainstream lenders will not take on those with even slightly impaired financial records
- Most mortgage schemes have ‘early repayment charges’ which are payable if you move to another lender before the scheme ends. If you are still within a scheme period and your own lender cannot give you the mortgage you require, and you have to look elsewhere, these penalties can often be high and could mean you need to delay your decision to move
On top of this is a short supply of homes on the market for sale. And without the first time buyers at the bottom of the chains being able to secure loans the people they buy from will not be released to buy further up the ladder, and in turn the people they buy from cannot move further up themselves, and so on.
A competent and experienced mortgage broker such as Andy Wilson will be well placed to find you the most suitable home mover mortgage given your particular circumstances. If you really stand no chance at all, he will be honest and tell you so, but also tell you what to do to improve your chances later. Andy may not always tell you what you want to hear, but he will always tell you what you need to know!
To arrange a no-obligation meeting at Andy’s expense to discuss your options, please use the ‘Contact Andy’ form below.