By whatever measure you care to apply, it can’t be denied that buying a house in 2010 is a whole different ballgame to buying one in 2008! One of the major factors affecting the mortgage market is the fact that, during the past twelve months or so, the total number of products has fallen by more than 23,000. And not only are multiples of up to six times income no longer an option, the number of lenders prepared to lend more than 90% of property value has also taken a nose-dive. Little wonder then that if you have a poor credit history finding a mortgage is not an easy task.
This is why the words of David Hollingworth of mortgage broker, London & Country, are balm to the property buyer’s soul. Hollingworth believes that ‘although the market has changed substantially since the onset of the credit crunch, it is still possible to get a mortgage, and there remain thousands of deals out there.’
He offers the following advice:
- Put down as large a deposit as you can because the keenest rates are only available to those with a deposit of 25% and above.
- Deposits are even important if you are remortgaging. Hollingsworth explains that, because of falls in house prices, you may have slipped into a different loan-to-value (LTV) band. The advice is to use any savings you may have to reduce the loan-to-value and thereby get a better mortgage rate. Remember though that once the money has been used up in the mortgage you won’t be able to get hold of it again, so leave yourself a buffer in case of short term emergencies.
- One of the major causes of the credit crunch was the fall of the sub-prime market, that is, people who borrowed more than they could possible repay. Because of this, people with a poor credit history will struggle more than most to find a competitive deal. Check your credit record through various agencies, such as Experian, Equifax, or Callcredit Check to ensure that there is nothing unexpected or untoward on your record that shouldn’t be there. It is also important to register to vote – not being on the electoral role will damage your credit rating.
- Mortgage-brokers can help and, if your case is at all complicated by something like missed payments or a county court judgement, you are strongly advised to contact one. Always use a broker who is registered with the Financial Services Authority.
- If you don’t like the idea that your mortgage repayments can change depending on the interest rates, go for a fixed rate mortgage. And from a current interest rate of 0.5%, the only way is up!
- When it comes to arrangement fees, some lenders offer a choice of paying a higher arrangement fee to get a lower mortgage rate. This fee is generally added to the mortgage and it is probably best to have a very slightly higher mortgage and pay lower rates than vice versa.