They're mortgages, but not as we know them

03 March 2008 / by Rachael Stiles
The decline of 100 per cent mortgages and the introduction of a 10 per cent minimum deposit will change the future of the UK buying culture.

Several weeks ago, first time buyer mortgage deals could be as much as 125 per cent of the property's value, usually for making home improvements or to pay for the additional costs and fees of setting up a new home, but that was until all lenders withdrew such deals, and many have since stopped offering 100 per cent mortgage deals as well, demanding a five or even 10 per cent deposit.

Katie Tucker, from mortgage expert John Charcol, thinks this will change the direction of consumer buying culture in the UK for years to come, as buyers will have to save in advance for their first home, marking "a return to our parents' generation's philosophy of saving" before the dawn of the 100 per cent mortgage made it easier to enter the market.

As a result, Ms Tucker says, "More young people will stay at home for longer, and those paying rent will have a difficult time saving as well. It will have a knock-on effect for the whole economy as it takes spending money for those age groups out of the retail system.

"Some parents may be able to gift deposits but more parents need to keep hold of their own equity to replace the pension funds they have been let down on. Such a constraint on availability of money to buyers can only readjust the property market back down in value."

Consequentially, this will mark a return to a savings culture, Ms Tucker concluded. Credit is not as cheap as it has been in recent years as a result of the credit crisis, and first time buyers will have to work longer and harder to get a foot on the increasingly elusive property ladder.

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