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Now existing home owners face mortgage squeeze

Thursday, 2 February 2012 11:59 AM

Problems getting a mortgage and raising a deposit are not confined to first-time buyers and are spreading to existing owners too, according to the Council of Mortgage Lenders (CML).

Home movers typically rely on the proceeds of the sale of their existing home as they key source of finance for the deposit on a new proceed.

However, with house prices still 10 per cent or more below the peak of 2007, moves have less equity to play with when they are looking at taking out a typical 70 per cent mortgage.

"It seems reasonable to suppose that a significant proportion of recent house-buyers would be unable to finance a move up to a more expensive home today, unless they also had substantial savings to top up their deposits," says the CML.

It adds that its latest mortgage survey hints at "a significant rationing effect taking place amongst existing home owners" with lower-income families and those unable to save now less able to get a loan. Meanwhile the average age of a home mover has increased from 37 to 40 over the last five years.

The CML says the trends could help explain why transactions are so low and adds that: "Another outcome may be that those who are able to call upon the bank of mum and dad – or other means of support – may find that help is needed not only to step on to the property ladder, but to move up it as well."

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