UK mortgages: “It’s not all doom and gloom”

February 20, 2009

— Jane King is an independent mortgage adviser at Ash-Ridge Asset Management. The views expressed are her own. —

In the current climate, we have the irony of property suddenly becoming more affordable and yet lending is down by 52 percent in the year to January. The commonly held view is that it is almost impossible to get a mortgage and many first-time buyers are still frustrated in their efforts to get on the ladder. But it’s not all doom and gloom.

Firstly, there are providers with funds who want to lend. What they don’t want is the sub-prime type of borrower that got many banks into trouble in the first place, and this is set to be the long term approach of many who decide to remain in this market. This will be good for future stability and something that should be encouraged.

Anyone seriously looking to purchase or remortgage should take independent advice from a properly qualified mortgage adviser (try First meetings are usually free of charge.

For first-time buyers and key workers there are government-funded schemes available, which are not widely advertised but are incredibly popular. The criteria and flexibility have widened in recent times and the schemes now encompass many individuals who would not have qualified in the past.

For key workers such as policeman and nurses and other eligible groups there are Shared Equity Schemes whereby you purchase part of your property and rent the remaining portion.

Try your local housing association in the first instance – they will let you know what properties are available and will advise as to your eligibility. An independent mortgage adviser will have access to the lenders who provide the mortgages for these shared equity loans and will be able to find you the best deal for you. I cannot recommend these schemes highly enough and as new funding is often released in April, the timing could not be better. For information about housing associations try Directgov.

For borrowers looking to remortgage, they should compare their current lender’s offering before moving. With low interest rates, it’s often not worth moving lenders once arrangement, valuation and legal fees are taken into account. A good adviser will always make this comparison before recommending any alternative.

When you start looking you will find that, because of low interest rates, there are some great deals out there. If you have a hefty deposit or plenty of equity in your property then you can access some very competitive rates. For a list of some of the best deals go to

Do not be tempted to consolidate debt and secure this against your property. This can seem like a good idea but needs careful thought. In today’s uncertain environment one option is to insure your mortgage payments against redundancy if you are eligible.

Although the government has offered limited help for those facing arrears, the details are still sketchy and will only cover interest payments. If you are facing repayment problems, always contact your lender as soon as you can, as it will have options available to you – it is not in the lender’s interest to repossess.

Do not assume that your usual High Street bank has all the answers – shop around, use the Internet and ask friends and colleagues for recommendations.

I believe that this situation will continue at least until the end of 2009 – the recovery will only start when consumers regain their confidence in the economy and are comfortable that their jobs are relatively safe.


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Overall good advice but let us all consider what “recovery” means. I believe Sir John Gieve said yesterday mortgages must be capped in order to stop houses going up 50% in a few years(a rise that should have taken 40 years in line with wages). I think everyone knows house prices must come down 35% or more from 2007 peak, if lending is tied in again to income (some say 4 times some 80% of 2 wages), the maths speak for themselves. Even if you are on £50000 (top 1/5th UK) that is £200000. If you earn £25000, that is £100000. House prices are going to have to drop, lenders know this which is why they do not want to lend more than 60% currently at a low interest rate. If we want lenders to lend sensibly this has to happen. I believe the UK borrowed 6 billion from overseas to finance the mortgage market in 2001, and 750 billion in 2007, it broke the banks which is why Sir John Gieve said the UK must concentrate on capping mortgage lending and returning to the old practice of percentage incomes and sensible LTV’s. So ignore all green shoots articles, house prices will fall its just that nobody appart from Sir John want to say they have to and will. Rightmove this week said that houses were selling at 25% less than their value in 2007 so don’t jump in yet and get stuck like everyone else in negative equity, the market is changing and capped mortgage lending will keep it affordable

Posted by Kathryn | Report as abusive

A well documented , if marginally predicatable on the whole “come see and IFA , were the good guys” slant. Banks are desperate to lend money to the right customer The rediculously uninformed author of the first reply however I must commend for cheering up my day with the ill informed pesimistic diatribe. Put simply house prices can’t afford to fall another 35% as the situation it would leave this country in would make any form of economic recovery impossible for a substantially longer number of years. Migration of workforce would become non existant and we would return to the days of mass council owned rented properties rather than the steady increase of privtely owned mortgaged properties.

Posted by An elightened one | Report as abusive

I think in this country we have cycle of boom and bust . We are always seeing our home as future cash pot than a family home.Banks on the other hand have got shotr memory ,once this negative mind set and the fear of loosing the the profits gone from majority leanders their thinking,they will start lending race in search of hugh profits from customers.

Posted by ash | Report as abusive

Mmm. Sadly it’s not the customers that got banks into trouble, but greed from the financial institutions who CREATED the sub prime market.

Posted by john | Report as abusive

I responded already to this article and someone said I was misinformed, the country could not afford for houses to lose 35% of their value. I am really interested to know what the answer is, when apparently we could not afford to buy houses at the price they were in 2007 without borrowing 750 Billion from overseas. Gordon Brown said today that it must be the end of the 100% mortgage and lending must be tied in with income (very old fashioned idea), but Gordon Brown said it MUST be a return to old fashioned banking. The US have seen 58% wiped off the price of their housing stock, it was 20% this time last year and EVERYONE was saying it would not go lower. So how can we continue to borrow 750 Billion a year from overseas to finance our mortgage market? Certainly people are not putting money in to building soceities for 1 % interest . So if we can’t afford houses at the level that they are and we can’t afford for them not to be at that level then what IS the answer? I was of the belief that the banks and government have known for a long time house have to come down 35% which is why the lenders have tightened their criteria . I am sure there was a leaked paper last year regarding this. I guess not everyone in negative equity will default, and I thought the government and lenders were braced for those that will default (that doesn’t mean they do not have to pay).

Posted by Kathryn Layard | Report as abusive

Kathryn comments go to the very heart of the problem. Will the Government let the market correct price in line with income, or artificially protect them at the expense of first time buyers? For a party named Labour to practically write off much of the next generations of first time buyers would be shameful. However, Mr Brown will probably do this in my opinion as he will be looking for votes, and those who (still) own will be more likely to vote. He’ll call it prudent, conveniently forgetting the last decade of wanton abandon that occurred on his watch.

Posted by David Johnston | Report as abusive

I agree , it is not all doom and gloom. Granted we are in the midst of the worst financial crisis in living memory, millions are losing their jobs , millions are losing their homes. But those homeowners, who have managed to hold on to their jobs, have been presented with a historic window of opportunity to do themselves and their families some long term good. If you have equity on your house (or a hefty deposit) , you can get a low interest mortgage. The advantages are two fold: 1. You free up extra cash each month , which can be used to make lumpsum repayments of capital. 2. Those on a low interest repayment mortgage, will have repaid more capital in year one , than those on a high interest repayment mortgage. I think people should sieze this opportunity and make the most of it.


Posted by J Shetty | Report as abusive

The trouble is the swap rates are killing fixed rate deals or making them very high. That is going to stifle any kind of recovery. But I do agree that prices need to drop somewhat more so reasonable income multiples can be used.

Posted by M Edwards | Report as abusive