There is no doubt that the credit crunch has resulted in tougher terms for anyone looking to get a mortgage but how has it affected us locally and are there still options for those hoping to get on the property ladder?
SPF Private Clients, Guernsey’s largest mortgage broker explains why the goalposts have moved and offers information and advice on what prospective home buyers can do to fund their first property purchase.
Why is it more difficult to get a mortgage?
The UK is considered to have turned the corner with regards to economic recovery and the housing market there is growing rapidly but the credit crunch has left us with a legacy of more cautious lending and most banks have stricter controls. Certain lenders are now adopting the ‘mortgage market review’ (MMR), which includes questions on ‘lifestyle’ expenditure to take into account all of your other monthly outgoings. This is not a mandatory requirement in Guernsey at present and many lenders are not introducing it so there are plenty of options that don’t require an MMR. However, 2 local banks that are branches of their UK parent, are adopting it and though this may lengthen the process, a more positive view is that it gives you greater confidence in your ability to make your mortgage repayments, even if rates go up.
Equally positive is the fact that obtaining finance in Guernsey in terms of multiples of salary remains competitive. It is generally the size of the deposit that is causing problems for the first time buyer market.
The key issue is the necessity for borrowers to cover the 10% deposit, together with the associated legal costs of around 4%. So, based on a purchase price of £300,000, a borrower would require a deposit of £30,000 together with a further £12,000 to cover the associated purchasing costs. A not insignificant sum.
I have a deposit, what should I do?
For those who can provide a deposit, choosing the right lender is just as important as each has its own respective niche in the market, whether this is by offering higher salary multiples or offering more competitive interest rates. For this reason, the merits of using an experienced mortgage broker, such as SPF Private Clients, speak for themselves.
Why buy at all?
We have a culture of property ownership in Guernsey, and, given the choice, most islanders would prefer to have a place they can call their own. Once you have secured a mortgage the repayments can be on a par with paying rent for a similar sized property, but owning a property offers a greater level of security and represents an asset for you and for future generations, if required.