Banks are tightening their criteria for lending money to borrowers. Official figures show that they are shunning those with lower deposits in favour of people who have more money to put down initially.
Mortgages to people with a 10% deposit has fallen for the third consecutive quarter up to the end of March, according to stats from the Bank of England.
Only 2.9% of mortgages approved during this period went to people who were borrowing 90% of their homes value. Lending volumes were also extremely lower for those with only a 5% deposit.
Banks and building societies have been showing a stronger preference for borrowers with bigger equity stakes in their property. 68% of all mortgages in the first quarter are going to people borrowing less than 75% of their homes value.
There has also been a drop in the number of mortgages advanced to single people looking to borrow more than 4 times their annual income. Only 9.1% went to these single people compared to 11.6% a year ago.
The tightening in lending is likely to be related to the introduction of the Mortgage Market Review, in April last year. Lenders are more careful and will evaluate whether the borrower can realistically pay the money back over the agreed term.
The main point to make is that for the moment interest rates are lower and seem to be quite stable, the average rate paid by new borrowers fell by 25 basis points to stand at 3%. These lower interest rates have also helped a great deal to drive a further drop in arrears and house repossessions during the first quarter.