Before the recession hit the UK with full force, it was relatively easy to get a mortgage, particularly when compared to the challenges potential homeowners have been faced with recently. However, the past couple of weeks have seen some announcements that appear to herald the return of the 95% mortgage. This is something that was previously thought to have disappeared into the crisis that followed the credit crunch. So what does its return say for the housing market?
Less to save to be able to buy a house
This is undoubtedly the clearest message that has come through to potential homeowners in recent times. If you are looking to spend £180,000 on a house you would need to save £18,000 to satisfy the requirements of a 90% mortgage. However, if 95% mortgages are to become more prevalent once more, this would be halved to just £9,000 to save. This is still a significant amount of money but it is more achievable than double that amount.
Announcement comes from Yorkshire Building Society
These mortgages are not available from every provider. However, the Yorkshire Building Society has thrown its hat into the ring and launched a considerable number of offers that focus on the 95% deal. We are not focusing on a couple of offers here: the total amount of offers is said to add up to thirty six.
The building society will not remain alone in the market for long either. The next few weeks should see the introduction of further 95% mortgages. These will be brought in by the likes of Barclays and Santander among others.
Are we on a hazardous path once more?
The news of these mortgages will no doubt come as a relief to all those who are currently renting and who want to own their own properties instead. However the news has warranted a note of caution from those who are experts in the field. Being able to borrow up to 95% of the value of a property makes it more likely people will get into trouble paying it back. So while the government is keen to boost the housing market and loan providers are keen to make it easier for people to borrow again, some are cautious about the move.
It will be interesting to see whether the widening array of 95% mortgages does boost the housing market in the way that will benefit it long term. Many have learned their lessons on the hazards of getting into too much debt and then not being able to pay it back. However, this will not apply to everyone. The more mortgages are provided with lower deposits attached to them, the easier and more tempting it is to once again borrow over what you can afford.
We shall be watching closely in the coming months to see how this new development affects the housing market. Perhaps the best message here would be ‘proceed with caution’ as far as potential homebuyers are concerned.