The Mortgage Market – Then and Now

There’s no doubt that the financial crisis of 2007 sent shock waves through the world. Nowhere was this more evident than in the housing market. The impact on mortgages and their affordability and availability was a big part of this. Banks, trying to overcome huge financial losses, became less willing to lend and Government began looking closely at how the market could be regulated better.

Prior to June 2007, most brokers would agree that funding mortgages was relatively easy, with the cheapest rates available to most borrowers. Lenders were offering 95% mortgages and there were also plenty with 100% products on the market.

By November of 2007, however, the mortgage sector was really beginning to suffer and by April of 2008 the last 100% mortgage was pulled from the market. The days when lenders didn’t look closely at affordability were essentially over. Uncertainty over interest rates and the possibility of unemployment also impacted on the number of people coming onto the market and looking to buy a home.

Now, ten years on, the mortgage industry has recovered to a certain extent and there are certainly more options out there. There has, since the crisis, been a recurring issue of new home buyers getting onto the market – not being able to meet the more stringent lending conditions that came out of the sector post 2007.

The good news is that brokers are finding it much easier than before to source lending for their clients. This seemed to ease in the latter half of 2016 with brokers reporting that they were finding it much easier to source mortgages for first time buyers. They were also beginning to find it much easier to cater for non-standard buyers on the market.

Regulations that came out of the Mortgage Market Review put a lot of restrictions on borrowing which some feared would stagnate the sector and stop people from being able to borrow. This changed the way that affordability was assessed, looking at applicants overall financial health rather than just income.

This was not meant to be self-assessed by the borrower either but now has to be verified by the lender. With the reduction in interest-only mortgages and larger deposits required, there was plenty of speculation that the market as a whole would be unable to function properly. Add in the rise in the cost of living and there were plenty of factors that could work against those looking to buy a property. The introduction of extra stamp duty for buy to let properties also had an impact on the market when it was introduced in April of 2016.

For now, mortgage lending remains fairly stable if undramatic with levels expected to be around £248 billion this year. The experts predict that it will stay resilient but level off for the immediate future, particularly while the issue of Brexit is still on the table.

For buyers, the time old problems of choosing the right mortgage product, getting accepted and affording the initial deposit remain. Having said that, it is easier now to get a mortgage compared to the immediate post crisis market, where banks were mostly unwilling to lend, particularly for first time buyers.

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