How hard is it to get an 80% mortgage?

While the prospect of saving a 20% deposit may seem daunting as you itch to take possession of a brand new home, the reality of the UK property market is that 80% mortgages are the product of choice for most lenders, over and above a 90% mortgage  and the resurgent 95% mortgage.

New data published by The Council of Mortgage Lenders (an industry body comprising of banks, building societies and other lenders who jointly account for 94% of all residential mortgages) shows that in June 2011, a total of 46,700 home loans were approved, of which 18,100 were for first time buyers – with the majority being 80% mortgages.

Although it’s harder to save a 20% deposit on a property, it’s actually much easier to get an 80% mortgage than a higher LTV, particularly for those who have never got on the property ladder. Mortgages with a lesser deposit, such as 90% and 95% mortgages have much more stringent lending conditions attached and in the case of 95% mortgages, will often be linked to harsher credit scoring.

In contrast, an 80% mortgage is seen as a safer bet by most lenders – as  the amount being borrowed is less, repayments are typically smaller, which suggests the monthly instalments will be met much easier. For those first time buyers taking out a home loan in June with an 80% mortgage product, the monthly payment represented just 13.4% of the monthly household income. This small proportion shows a much higher likelihood of the mortgage being repaid and not falling into arrears and makes it easier for the applicant to prove to the bank that the mortgage is affordable – removing the biggest barrier to the approval process.

Every major lender in the UK offers an 80% mortgage product, making it easy to find a deal that is suitable. The affluence of this LTV ratio on the high street means most buyers will find it easy to not only get a deal that suits but also to find a lender willing to approve a loan.