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Mortgage lenders starting to reduce deposit requirement

The last few weeks have shown what could be a turning point in UK mortgage market with more mortgage lenders now prepared to accept smaller deposits from customers. The minimum deposit rose to around 40% at the height of the UK recession but of late there has been a marked reduction in this level and some mortgage arrangements now only ask for 15% upfront. So what next?

While the move to lower deposit requirements is very welcome it is worth pointing out that those able to put more money down as a deposit are attracting lower rates than those who cannot afford up to 40%. However, the premium rate charged to those only able to afford low deposits has fallen over the last few weeks although there is still much work to be done.

It will be interesting to see how mortgage lenders in the UK react to today's news that the Bank of England intends to maintain base rates at 0.5% for the foreseeable future. In a perfect world we should see mortgage rates start to soften but money is still tight, unemployment is still growing and the economy is still under pressure. Maybe we are hoping for too much in the short term but a reduction in deposit requirements is certainly a step in the right direction.

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