How Does the Mortgage Market Getting Effected

| Posted: 19-06-2008 | Comments: 0 | Views: 3 | Rating: (50)

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If one goes by the recent reports, there is an indication that many lenders are withdrawing 125% mortgages from the market. These mortgages are quite popular with first time buyers, as they can easily raise the money required to purchase their property, and also additional funds for things like decoration, home improvements, and furnishing of their home. With the global credit crunch, however, which continues to make lenders think twice about the type of products that they offer, this proposition could well be on its way out in the future.

In case 125% mortgages are withdrawn from the market, a lot many people would be affected - like those who currently have 125% mortgages, and those looking to avail this type of mortgage. If and when the homeowners, who already have a 125% mortgage, decide to re-mortgage, they would experience difficulties, resulting from almost all 125% mortgages being taken off the market.

A 125% mortgage loan comprises 95% from mortgage and the remaining 30% from an unsecured loan, for a maximum of £25,000 - £30,000. If those already with a 125% mortgage now decide re-mortgage, the chances are that they would only be able to re-mortgage the 95% mortgage part of their loan, with no additional 30%. To add to their woes is the fact that they may experience further difficulties, with already being classed in the category of having the additional financial commitment of a large personal loan.

Godiva Mortgages, Coventry Building Society, Plus Mortgage Home Loans, Alliance and Leicester, and the Abbey are some of the lenders who have announced the withdrawal of their 125% mortgages. According to an industry professional, borrowers with 125% mortgages, who wish to re-mortgage may experience difficulties because of their unsecured loan. To add to their woes is the fact that they may experience further difficulties, with already being classed in the category of having the additional financial commitment of a large personal loan.

Specialist loans are offered by some banks to those with decent credit, and at times, one can enjoy extra benefits - like HPI checks, discounts on insurance cover, and free or cheap breakdown cover with these loans. In most cases, to get a bank loan for your purchasing a car, you will need to have good credit. In fact, your income, employment status, and credit rating are the factors that determine the amount that you would be able to borrow. With the global credit crunch, however, which continues to make lenders think twice about the type of products that they offer, this proposition could well be on its way out in the future.

Along with people looking for re-mortgage, first-time buyers looking to take out a 125% mortgage are also likely to suffer as a result of these withdrawals. Who wish to re-mortgage may experience difficulties because of their unsecured loan. Though these mortgages have been a popular choice of first-time buyers in the past, with so many lenders now taking these mortgages off the shelves, many first-time buyers would be unable to get a 125% mortgage.

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