Ajay Ahuja Blog Post on Banks, Deposits and Credit Checks

Just imagine if you are a tenant for a minute. You can see property prices are at a level that if you were to go and get a mortgage it would be cheaper to buy than to rent. This is the case for 84% of all areas in the UK.

So you go to your local bank and they say:

“minimum 15% deposit”

Okay a bit of a problem but you will ask my parents for a loan. So your parents gift you a nice amount of money and then the bank says:

“sorry, you must have earned the deposit”

So you go to a mortgage broker who knows which lenders do not ask too many questions about the source of the deposit or knows a lender or two who do not mind a gifted deposit but the broker says:

“You failed the credit check”

But the mortgage broker says they know of a lender who requires a 20% deposit and will charge you 7% interest rate on a repayment only basis and you say:

“GET LOST!”

That is how first time buyers must feel. They are closed out. Unless you have wads of cash in your bank saved up from your salary and a 25% deposit you simply cannot benefit from the fact it is cheaper to buy than to rent.

So what is happening? Well rent is going through the roof. This is all good for buy to let landlords but there are also others who are noticing this:

THE BANKS!
If a landlord now approaches the same bank with the proposition of renting the same property to a frustrated first time buyer the bank wants to listen to you!  Even more frustrating for the first time buyer. Another more frustrating thing is the landlord could be a wealthy overseas resident who has never even been to the UK.
So where is it all heading? Towards a greater inequality of wealth which could be dangerous. The haves and the have nots. The haves becoming a smaller amount of the population but more wealthy and the have nots becoming bigger and ultimately owning less.
So which one are you – the haves or the have nots?

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