90% Mortgages

Since the onset of the credit crunch, 90% mortgages (requiring 10% deposit) have been hard to find. In a period of falling house prices, mortgage lenders have wanted to protect themselves against negative equity by requiring high deposits. Although it is frustrating for new mortgage lenders it is understandable as banks need to improve their balance sheets. With house prices falling so much the banks could be left with large losses if the home needed to be repossesed.

The first sign of an easing in the mortgage market came as Cheltenham & Gloucester and First Direct offered reasonably priced 90% mortgages. They had all but dissappeared until last week. It will be interesting to see how many people take up their offers. It could lead to them withdrawing the mortgage deal quite soon if they get deluged with borrowers.

People looking for a mortgage deal in the present climate should be prepared to keep an eagle eye out for the best deals. Deals are often don’t last for very long.

With interest rates at an historic low, mortgage payments will be quite cheap. But, in the short term taking out a 90% mortgage is likely to lead to some negative equity as house prices could continue their relentless fall.