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How to fight the mortgage lending collapse
Figure released in the last week have revealed a collapse in lending by high street banks, creating even tougher conditions for mortgage borrowers.
The March figures from the British Bankers’ Association showed that its members net lending (the amount advanced less repayments made) was only £800 million, the lowest figure in twelve years.
The Council of Mortgage Lenders said that in January, 40% of sales were to cash buyers, compared to an average of 18% before the cash crisis, a trend which can be directly attributed to the lack of mortgage lending. With banks set to reduce lending further this year, the collapse in the number of borrowers securing mortgages to fund house purchases is likely to continue, unless building societies can pick up some of the slack.
The lack of buyers using mortgages to secure house purchases is expected to hit property prices in the coming months, with sellers outnumbering buyers. So at a time when even good borrowers with a big deposit are being turned down, we show you some steps you can take to buck the mortgage collapse trend.
Step one: Pay off your debts
Mortgage lenders look more favourably on applicants who have no other debts. So clearing your debts will give you a better chance of a green light.
Step two: Start saving
These days you will have a better chance of being accepted with a 20%+ deposit. Plus, the more deposit you’re offering, the better the mortgage deal you’re likely to get.
Step three: Keep records
Show that you have a consistent and reliable income. Keep all bank statements and pay slips. If you’re self-employed - produce yearly accounts compiled by a reputable accountant.
Step four: Deal with your borrowing past
Get a copy of your credit report from a credit reference agency such as Experian. This will give you a chance to amend incorrect or unfair information by adding a 'notice of correction' to your report.
Step five: Use a mortgage broker
It's wise to seek out an independent mortgage broker, such as Census Financial Planning. We can provide mortgage advice across the full range of mortgages and home loans available and we work closely with mortgage lenders to tailor their proposals to suit you.
Chartered Financial Planner