10% deposit mortgage deals down 89% in 3 months

17 November 2008 / by Rachel Mason
Mortgage deals for people with a 10% deposit have almost disappeared from the market according to data from Moneyfacts.co.uk.

According to the site's research, there are only 66 90 per cent LTV (Loan to Value) mortgage deals left on the market compared to 586 three months ago and 1,197 in February.

And 95 per cent LTV deals are almost non existent, with only 35 now available, compared to 74 deals three months ago, 269 six months ago, 1023 in February and 1,126 a year ago.

Those looking for first time buyer mortgages are going to be the most affected by the drop in low deposit deals, as most are unlikely to be able to build up a large deposit.

"The current climate does not bode well for first time buyers looking to enter the market," said Moneyfacts spokesman Darren Cook, "it is unsettling, but not surprising that we are witnessing the demise of 'small deposit' mortgages."

Although house prices are down and still falling, which in theory make buying a property more affordable, the lack of mortgage deals available are making getting onto the housing ladder more difficult.

The only type of mortgage deals that have seen an increase in availability are for people who have a 15% deposit; these are up from 198 to 228, and although 20% and 25% deposit deals are also down, they have only experienced a slight drop, which means those who have more equity and people looking to remortgage are being hit less dramatically than first time buyers.

"The risk of negative equity will continue to be a threat until the property market bottoms out and it starts to rebound and banks regain their appetite to lend to first time buyers," continued Mr Cook.

"Banks are reeling in their exposure to higher risk lending due to the continuing fall in property values and the bleak economic outlook. Borrowers currently need at least a 40 per cent deposit to stand any chance of negotiating a top rate deal.

"Unless a first time buyer has no alternative but to enter the market and has a large deposit to offer, they possibly need to hold fire and wait for those property prices to hit bottom and them find that dream home," he said.

© Fair Investment Company Ltd