Mortgages Become More Available

Having a mortgage approved is getting easier with more mortgage products available and now smaller deposits are required. Good news for house buyers and house sellers.

There are at last signs that the mortgage market is beginning to ease its grip on its very restrictive lending criteria. There are now 7% more mortgage deals than in the previous month and there are now just under 100 deals that require a 10% deposit. The number of mortgages that require a 15% deposit has risen from 209 in December 2008 to 272 in May 2009 and there is similar jump for 20% deposit loans. Figures from the Bank of England show that mortgage approvals rose by 4% in March 2009.

These are small changes in a slumped market and in a time of recession, but at least these changes are moving in the right direction. They show that the banks are gradually beginning to lend again, and to lower the demands on their borrowers. As this continues and more buyers are able to enter the market house prices will begin to bottom out which will bring at least some stability to the market.

However, with continued rising unemployment, the news is not all good. House prices are still expected to fall this year, with some economists predicting a fall of another 6%. Having said this, estate agents have seen a continued increase of interest from potential buyers and sales levels have risen through February, March and April this year. This is somewhat unsurprising with house prices haven fallen so far and low mortgage rates together with it being Spring time, traditionally the busiest time for estate agents.

If you are considering getting a mortgage now, you would be wise to consider getting a fixed rate. The Bank of England is expected to keep interest rates at a record low 0.5% for some time to come. However, once the rates start to rise again they could rise quite quickly and those stuck on variable rates could see a sharp increase in their monthly payments.

Borrowers already show that they have this in mind: five-year deals are now more popular than two-year deals. Though when choosing your mortgage remember to compare the redemption penalty period as well as the mortgage length and rate. Often, with the longer fixed periods you have a longer fixed redemption period. So you need to consider and plan how long you expect to stay in your property. It is sometimes possible to move your mortgage with you if you do move within your fixed period but not always, and you may still have to pay a hefty fee.

The housing market is still in the doldrums and will be for sometime. However, with price falls slowing, record low interest rates and mortgages beginning to ease, buying property is becoming more attractive to mid to long term investors and to individuals whose employment prospects are safe.

As the economy recovers mortgages will gradually become more available as banks stabilize and in turn want more customers - safe customers. Availability of mortgages won't return to 2007 levels which, in the long term, is a good thing to protect financial systems and in turn, individuals. However, we are beginning to see the start of some confidence in the mortgage market - good news for house sellers and buyers.