At the minute lenders and banks are letting people make lower deposits on mortgages. Instead of 10% it is 5% of the sale price as a deposit. For most first time buyers, people trying to get on the property ladder this is seen as good news as most struggle in finding the funds for a deposit.
They may qualify for the mortgage and the repayments, and may be able to afford to repay the loan, but they cannot save up the large deposit that is required to buy a property. In many instances the amount of the deposit to buy a property is as high as 20%. So that's 20,000 for a 100,000 property. It can be very difficult to save up £20,000. The government was reluctant to do this. In the past when people have invested a lower deposit in something they become less concerned about walking away or getting the property repossessed.
The numbers may seem a bit odd but the figures don't lie. So while a lender offering these low deposit mortgages is a good thing, they need to be cautious and underwrite the loan very carefully. Low deposit mortgages aren't a new concept but with everything that is going on at the minute, the economy in recession and the credit crunch, it is a good idea to help first time buyers on to the property ladder.