Mortgages dry up as squeeze tightens

12:50pm Thursday 6th November 2008

Comments (5)   Have your say »

By Jeremy Grimaldi »

A MORTGAGE broker in Swindon is having to turn away eight out of 10 people trying to remortgage their homes.

Carl Bunce, the managing director of Cannon Mortgages in Old Town, said the number of people trying to reshape their finances is way up on last year.

It comes after the Adver revealed that 195 home repossession orders were brought before Swindon County Court between April 1 and June 30 this year – more than two a day.

Mr Bunce said a year ago, lenders were giving out no-deposit mortgages and lending five-and-a-half times people’s salaries.

But he says the outlook is now far bleaker, with high street banks expecting customers to have deposits of 15 per cent before considering mortgage applications.

And he said people with variable mortgage rates are having to find an extra £100 or £200 a month from the same period two years ago.

“When borrowers are forced to pay between £100 and £200 more a month they are often going to default,” Mr Bunce said.

“We are being contacted daily by people saying they want to remortgage their loans. We have to turn away at least eight out of 10. Some are panicking.

“Often when we do consider it the lender will send a surveyor round only to find out their property has been devalued so often they have a lot less equity than they thought.

“The number of people being given loans is down by miles. We were 40 per cent down on last year. I think it is going to get worse before it gets better, the credit crunch started last October and I don’t see it nearing a conclusion for another six months.”

Mr Bunce added that many of the problems occur when people first default on their repayments.

He said: “People need to be aware, they need to take action before they miss that first payment in this climate.

“In the small print of any loan it says ‘you must stay within the terms of the agreement.’ The minute you fail to do so you are defaulting on that agreement – meaning you are then high risk.”

Mark Noble, the managing director of Castle Mortgages, said that in these tough times the simple fact is that anyone deemed high risk will be declined.

But he said his company arranged 10 mortgages for customers last week which he said is healthy.

He added that he hopes banks’ lending policies will start to relax by early next year.