Smaller deposits starting to emerge

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by Kay Murchie

Figures from financial information service Moneyfacts have revealed some good news for potential buyers after a rise has been noted in the number of deals demanding smaller deposits.

While approximately 65% of mortgage deals still require a deposit of at least 25%, Moneyfacts shows that the number of mortgage deals requiring just a 15% or 20% deposit, has risen by 7% in the last month.

Darren Cook of Moneyfacts comments: “We are seeing a number of mortgage providers slowing reducing their strict criteria and are increasing the number of products available to those that can raise a 15% deposit, be it at a higher initial interest rate.”

Meanwhile, Ray Boulger of mortgage brokers John Charcol, said: “As lenders find the pool of customers who can put down a 40% deposit is shrinking, they are being forced to ask for smaller deposits.”

“What we have seen over the past few months is a change in lenders offering their best interest rates at 70-75% loan-to-value rather than 60%,” added Mr Boulger.

According to Moneyfacts, there are now 272 deals requiring a 15% deposit - up from just 209 in December 2008.

Meanwhile, the number of 20% deposit loans which are available has increased from 105 to 143 in the past month.

Further good news emerged for potential buyers this week after the latest FTB Affordability Review from the Halifax revealed that housing affordability for potential first-time buyers (FTBs) is at its lowest level in over six years.

Since the market peaked in 2007, affordability has more than trebled with houses deemed “affordable” in the first three months of 2009, for someone with an average income in one fifth of local authorities.

The Halifax points out that the house price to average earnings ratio has fallen from a record high of 5.84 in July 2007 to an estimated 4.34 in March this year - a decline of 26%.