Deposits are probably the biggest change to the housing market in 2020. With Covid-19 taking the spotlight.
It was quite common back in January this year to be able to get a mortgage with a 5% deposit. Unfortunately when Coronavirus hit that all changed. Since then Lenders reduced their maximum loan to value and most of them are under 85% still.
But why? Lenders are worried property prices are going to fall. So if your house is currently worth £100,000 for simplicity, and you took out a mortgage with a 5% deposit, then your mortgage would be £95,000.
What then happens if your property price falls, and is only worth £90,000. Your house is worth less than the mortgage. Therefore if the lender needed to get their money back, you would end up owing them.
This is why they are currently limiting their maximum loan to value. The good news is several of them are now back at 90%. You also have the help to buy and shared ownership schemes where you can still use 5% deposits.
The Stamp Duty Holiday by the government has kept property prices from falling this year. However Lenders are still concerned that they may fall at the start of 2021 with less housing market interest. If you want to take advantage of the government Stamp duty holiday are latest figures suggest you should apply before 6th December 2020.
If you have a 5% deposit and were hoping to get on the property ladder this year, you still can. It might just look a bit different to what you were planning now. If you need a hand in wading through the current mortgage market get in touch.