Mortgage lenders are approving fewer applications, putting an end to many a dream of home ownership. But is this really such a bad thing? Could it be better for our financial health?
If you once dreamed of relaxing with friends in a home you could call your own, the financial crisis may have given you a reality check – it’s changed the mortgage market beyond recognition.
You may even feel a pang of resentment towards all those who managed to borrow huge amounts with little, or no, deposit and are now balanced – if precariously – on the first rung of the property ladder.
Mortgage lending lowest for 10 years
Figures just released by the Council of Mortgage Lenders show that mortgage lending this August was the lowest it’s been in that month for 10 years – £11.4bn compared to a high of £34bn in August 2007.
There are a number of reasons for this. House prices are lower. Nationwide says the average was £166,507 in August 2010, but £183,898 in August 2007. And deposits are higher – the days of 100% (or even more) mortgages are over and you now need at least 10%.
But these are both symptoms of the fact that lenders are being much more careful about who they lend to and how much they lend them.
Get a mortgage the old-fashioned way
This might mean that fewer people can now buy a home, but it also means that only people with relatively healthy finances and a good track record can borrow what they need. It also means that borrowers are less likely to end up struggling with their repayments and even less likely to become trapped by negative equity.
If you want to become a homeowner, you still can, but you’ll need to do it the old-fashioned way – save up for a deposit and prove to a mortgage lender that you can afford it.
Have you had to put your home-buying plans on hold? Do you think we’re better off being forced to be more sensible about house-buying, or do you long for the free-and-easy days before the credit crunch?