Why Mortgages, Remortgages And Secured Loans Have Declined So Much

Mortgages, remortgages and secured loans have one very important feature in common, and that is that they all rely on the value of property.

They must all be secured on the equity of a property, and when equity stagnates or decreases, the inevitable happens, and that is that these home loans decline.

Although a mortgage, remortgage and secured loan have much that conects them, they also have distinct differences.

A mortgage is the loan required by most consumers when they want to buy either their first or subsequent home, and as there are very few cash buyers, most people will have a number of mortgages during their lifetime.

A remortgage is a new mortgage on a property taken out by a diffrent lender, either for the same amount, and simply to obtain a better mortgage deal, as hundreds of pounds can be saved monthly by switching a mortgage from one provider to another. On occasions homeowners remortgage in order to obtain additional cash that they can use for most purposes including holidays, weddings, adding an extension to their home, debt consolidation, etc.

A secured loan is a second mortgage that can be used for identical purposes as remortgages, but it does not replace the original mortgage which remains in place.

Before the recession these three loan products were in plentiful supply and in great demand due to the constant rise in house prices and the relaxed lending ciriteria of their providers.

Normally experts reckon that property doubles in value every seven years or so, but due yo the recession houses in many areas are worth less now in 2011 than they were ten years ago. For example properties in a private housing estate in Edinburgh, a city where property prices increase rapidly, semi detached houses selling for £160,000 in 2001 are now worth £10,000 less than that.

Therefore with the stagnation and decline in property value, many people have no confidence in applying for a mortgage, while others who would like and could benefit from a remortgage or secured loan have not sufficent equity to do so.

It is not only the fall in property prices that have caused the decline in mortgages, remortgages and secured loans, but it is also due to the fact that lenders have tightened up their underwriting and reduced equity margins.

Now the maximum LTV for homeowner loans is 85% for employed applicants and 75% for those who are self employed, and for mortgages and remortgages the maximum LTV is 90% with some lenders with others restricting it to 85%.

Prior to the credit crunch over 50% of self employed, when applying for a remortgage or mortgage, declared their own income, but now two years accounts or similar must be provided, making it very difficult for many self employed to obtain any financial product.

As such, the decline in house prices and the stricter underwriting has caused all three members of the home loan group to fall, and it is to hoped that the situation will be rectified in the near future.


------

Champion Finance has been established since 1985. They provide whole of the market mortgages, remortgages and secured loans . Helpful, sympathetic debt advice, debt managemet, debt consolidation and all other debt solutions are also available.When looking for a secured loan, remortgage, etc. look no further than Champion Finance.