Large deposits are "stifling" the housing market

The large deposits demanded by lenders to qualify first-time buyers for cheap mortgages is "stifling" the housing market, it has been claimed.

Paul Hearnden, a director at MyMortgageDirect, said that banks are being protective of their balance sheets but warned that the deposits potential homeowners need are just too big.

"The only way that we're seeing first-time buyers being able to get that much deposit together is [where] their parents are remortgaging their properties to release equity or giving them savings required to put down a big enough deposit for them to get on the housing ladder," he said.

He explained that this makes it difficult for those who cannot rely on that form of support.

A lot of the problem has to do with rules that have come into place regarding insolvency, Mr Hearnden explained, but warned that the housing market is being stifled by a lack of new buyers.

His comments follow findings from the Council of Mortgage Lenders which revealed that the aggregate loan-to-value of houses across the UK is 60 per cent.

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2011-08-10 13:05:59 © Moneyextra.com