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Required deposits soar in size

Required deposits soar in size

Category: Mortgages

Updated: 11/08/2009
First Published: 10/08/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
While house price falls over the last few years may have made property affordable for some, consumers have seen the average size of a required deposit treble during the same period.

As lenders have shied away from lending that has even the merest chance of risk, the average loan-to-value (LTV) has fallen from 91 per cent in August 2007 to 74 per cent today.

Therefore, the average deposit required on a £150,000 mortgage has shot up from £13,500 to £39,000.

House hunters without such funds have seen their options all but dry up, as the number of fixed rate mortgage deals that require a ten per cent deposit has fallen by 83 per cent.

Reflecting the cautious approach that has been adopted by the UK's banks and building societies, the number of deals available to those able to find a 40 per cent deposit has shot up by an incredible 2244 per cent.

"A threefold increase in the size of the average deposit is likely to hit first time buyers the hardest," said Michelle Slade, spokesperson for Moneyfacts.co.uk.

"Unless they can get help from the bank of mum and dad, many may have to defer their dreams of owning their own home for a number of years until they have saved more."

The number of variable rate deals remains low, as the possibility of customers defaulting when the base rate starts to rise is deterring lenders.

Those tempted by one of the deals still available have been warned to factor in likely rises in the future.

"On a £150,000 mortgage, borrowers with a tracker deal will see their monthly repayments increase by over £300 if the base rate returns to four per cent," Ms Slade explained.

"Although fixed rates are more expensive at present, they are likely to be a better option for those on a budget."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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