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Credit Crunch Effects on Residential Mortgages

This year it's estimated that 1.4 million people in the UK have fixed rates expiring, and these people may be in for a bit of a shock. Mortgage rates are higher than they were a year ago and the criteria set by mortgage lenders are far tougher.

Lenders are becoming stricter on the properties they lend on, looking stringently into property value (especially new build property), and are also becoming more rigorous on income multiples and general mortgages explained affordability. Anyone who is self-employed or is self-certifying their income will also face tougher criteria as lenders become increasingly risk adverse.

Up until about six months ago it was still possible to take out a 125% mortgage, whereas now the reality is the maximum you are likely to find is up to 95%. Lenders offering higher loan to property value (LTV) mortgages will tend to be less attractive due to higher fees and headline rates. This will pose difficulty for anyone coming off a mortgages explained high LTV mortgage, and people may need to find additional funds so that they can increase their deposit.

All mortgage headline rates have risen as money market rates have increased, forcing lenders to pass on this uplift in order to make a margin. Again this is due to the credit crunch, the last few years have seen a period with particularly cheap borrowing, but it is appears now the lenders are retreating to a more cautious approach. HSBC recently announced they would match the rate of people mortgages explained coming off a low fixed rate but it remains to be seen if this will offer true value when the fees for the privilege are taken into account.

Given the current market situation lenders are behaving in a particularly 'twitchy' manner, quickly withdrawing products or amending rates on their products. This is making it difficult for borrowers when it comes to securing a mortgage as it's tricky to keep up with the product situation. It is extremely important to use a reliable and knowledgeable broker and mortgages explained secure rates quickly when they are available.

Some securitised (borrow money from the markets) lenders are also not keen to take on new business in order to reduce their own debt. Northern Rock have made the decision not to offer a competitive rate to customers when their fixed or discount period comes to an end, the tactic here is to encourage the borrower to seek a mortgage with an alternative lender.

Our advice is simple, if your home is up for remortgage this year then act early to secure mortgages explained the right rate. We can secure rates in some cases up to 6 months before your existing mortgage ends. By acting sooner rather than later we have time to source the best deal for your circumstances, and can also act to put a new mortgage in place before LTVs fall. At Mortgages for Me we do still have access to the whole UK mortgage market and can therefore secure you the best possible deal.

To discuss your home mortgage requirements in the light of changes to market conditions please call us on 0845 148 mortgages explained 9165

Jonathan Moore writes from Mortgages For Business, specialists in mortgages deals
and commercial mortgages. Find out more at mortgages deals