Mortgage lenders making loan conditions easier

Posted on 17/05/2009

Mortgage lenders are starting to relax their lending terms. Lenders are more willing to accept smaller down payments under the 25% threshold. This is an attempt to reinvigorate the housing market by creating an upturn from direct home purchasers.

The number of people who are able to afford the initial down payment is fairly smaller than the number available more than a year ago. This, together with rising competition forces many lenders to accept lower down payments albeit charging a slightly higher interest rate.

Before the recession started in the UK 14 months ago the amount of down payment or initial deposit was very less at around 10% of home value. This however changed with the credit crisis and led to deposit percentages upwards of 30% in December last year.

This change means that the banking sector is finally starting to believe in the housing market once again. Banks are one of the most important stakeholders in the housing market and this reiterates the fact that the property market is slowly recovering.

This trend is expected to rise as more and more low deposit deals will enter the market. Competition will force lenders to offer better deals to be able to turn a profit with the small number of possible customers.

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