Categorized | International

Tightened Lending Standards Hit Lower Income Borrowers in UK

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Potential homebuyers with lower incomes are having a very difficult time in the current market securing a home loan in the United Kingdom. Lenders are becoming far less likely to issue a home loan to those with lower incomes, as they are now showing greater preference to those capable of paying a larger down payment.

With preference shown to wealthier borrowers, the overall mortgage loan approval rate dropped month-over-month just over one percent. With the debt crisis looking, lenders were very careful in their approval process. In fact, the average deposit was an incredible forty percent. Those that left a deposit of only fifteen percent accounted for fewer than ten percent of all borrowers. That is a substantial drop from the levels seen during the housing boom in 2007.

The banks have essentially disregarded first-time homebuyers. In general, first-time homebuyers leave a deposit of roughly ten percent. However, with lending standards becoming more stringent, only one percent of approved borrowers left a deposit that low.

While the number of approvals declined, the banks were more than able to make up for decreased numbers by lending more to the nation’s wealthiest individuals. The average loan sized that was approved was over three hundred and seventy-five thousand pounds.

With banks growing more cautious by the day, it is likely that mortgage loan approvals will continue to drop. The size of the initial down payment is becoming more and more important to banks when it comes to approving a mortgage loan application. Those that are able to put down as much as forty percent towards their mortgage are far more likely to receive a loan in the current market.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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