Raising the 10% deposit is holding back property sales
Friday 15th May 2009, 1:00PM BST.
HOMEBUYERS can still get 90% loan-to-value mortgages despite a drop in property prices, two brokers have said.
There had been fears that if property prices in Guernsey fell, mortgage lenders would be less willing to continue such deals.
Pierre Blampied, director at Savills Private Finance, said 90% deals were still available up to £500,000.
‘The rates available for this level of loan to value are generally higher, but with Bank of England base rate currently at such a low level these rates are not that high to make it unaffordable to borrowers to purchase property,’ he said.
‘However, what is holding back the market is the 10% deposit needed and the associated costs such as bond and document fees, which in total amount to a further 4.25%.
‘Despite the press releases we are seeing from the high street banks, it is very apparent to the mortgage industry that they are not keen to lend.’
Mr Blampied said the drop in property prices reported by the Policy Council was caused by a lack of sales in the middle to upper end of the market.
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Quote:
“Pierre Blampied, director at Savills Private Finance, said 90% deals were still available up to £500,000.
‘The rates available for this level of loan to value are generally higher, but with Bank of England base rate currently at such a low level these rates are not that high to make it unaffordable to borrowers to purchase property,’ he said.”
90% loan on £500,000 loan?
Big loans might be affordable now, but what happens when inflation rises, as it will, and interest rates rise again. These loans will then be unaffordable and people will be overstretched financially, causing misery for those taken in by the commission hungry salesmen.
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Pursuading people to borrow now because of low interest rates is a problem waiting to happen. Borrow now and pay later. Inflation will rise and within 18 months interest rates will rise to counter it. The low cost of borrowing argument is insane.
Hold on a minute. Isn’t this the same argument being trotted out by those in the States that want us to borrow 175million?
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