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Mortgage costs continue to fall

The Council of Mortgage Lenders (CML) has today confirmed that the cost of UK mortgages has fallen to a five-year low. The percentage of income required to cover the average mortgage payment has now fallen to 12% which will bring more and more people into the mortgage market and hopefully improved demand for property.

While it has to be said that the average household income has also fallen over the period in question, being able to finance your mortgage on just 12% of your household income does hold attractions. However, one of the reasons why mortgage costs have fallen so markedly over the last five years is because more and more mortgage lenders are demanding large deposits. Indeed the average loan to value for the first-time buyer has fallen from 83% in 2008 to 75% in 2009.

While there is no doubt there are some attractive opportunities in the UK mortgage market, UK lenders are now possibly being overcautious and demanding larger and larger deposits which is distorting the figures a little. The ability to create a cushion between the funds borrowed against a property and the value of the property is vital in the short to medium term to allow UK banking institutions to rebuild their balance sheets.

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