First time buyers and remortgagers need a hefty 30% deposit

Moneyextra.com mortgage index reveals the average loan-to-value rates has hit a two year low, along with the actual number of mortgage loans available.

The Moneyextra.com exclusive mortgage index shows that lending to first time buyers with deposits of five per cent is practically non-existent. Supply of borrowing for first timers with 10 per cent cash to put down, has decreased 84 per cent compared to the same time last year, and only 36 per cent of ready customers looking to climb on the ladder with a 15 per cent deposit, are finding the door open compared with Q1 2008.

The figures show that the average loan-to-value for first time buyers is 71 per cent compared to 82 per cent last year.

Mortgage expert, Richard Mason of Moneyextra.com said, "It's a catch 22 for first time buyers, the depressed market means there are bargains to be had but it's difficult to get on the ladder without a good deposit. Although there are loans available, on the whole lenders are being very prudent. We need to see some movement here in order to get the housing market moving again. Without plenty of competitive mortgages to choose from things will become even more stagnant.

The statistics show a similar story for people looking to re-mortgage with the average loan-to-value being granted is 69 per cent compared with 82 per cent at the same time last year.

At the beginning of March the Moneyextra.com housing index shows all mortgage lending was at a two year low but by the end of the month there was a 13 per cent increase. Richard Mason warns whilst it is positive to see lending figures slightly increase the rise might not last.

He urges people with debt arrears to take the opportunity to get themselves organised and if re-mortgaging isn't an option he suggests downsizing.

"People who feel they are going to hit problems should look to downsize on their own terms and avoid losing everything and being hit by a triple whammy of financial grief.

He explains:

Whammy number one;

When houses are repossessed, lenders have little to no intention of making a profit and in many cases will sell your house at a price that covers the loan outstanding, which is typically 10 - 15 per cent less its worth.

Whammy number two;

Lenders will aim to complete a sale within three months - meaning the property is marketed aggressively through estate agents. Combined with hefty legal costs, the overall return diminishes and you could even find yourself in debt after your house has been repossessed and sold.
Whammy number three;

Finally, during the period when the house is on the market homeowners' debts are set to rise leaving you out of home and further in the red.
Mason recommends: "If you are in debt with no end in sight you are best to arrange the sale on your own terms, before the debt gets out of hand. Three immediate steps to take would be: to speak to your bank and find out what your options are; speak to local estate agents for an accurate valuation of your house; and research what the available mortgage products on the market are at the moment. Going online to comparison sites can enable you to have a vast amount of information at your finger tips."