Can/why can't I get a mortgage?

RaoulPuke

Seeing a lot of mortgage questions here, I thought I'd offer the following observations/opinions on the matter, maybe it's good to keep in mind for anyone applying/thinking of applying.

I'm currently considering the process, and a lot of what I hear from research into banks criteria etc seems to make sense to me. I may be way out but experience with the process so far seems tally up but perhaps it's over simplified or incorrect?

1. Why aren't banks lending/why do insist on larger deposits these days?
Risk. Banks want to make money. They will have no problems lending to someone where they feel they will have no problems making money from the interest on a loan. It's in their best interest that you are always in positive equity, i.e. your house is always worth more than the loan and by selling you can always clear the loan immediately if required. This makes their books look good too.
With the current market in decline the deposit is the buffer/safety margin for the bank. If they want 20% deposit for the mortgage it's because they believe that the worst case scenario is that in the short/medium term that give the mortgage for, could possibly lose up to 20%. If the 20% loss is all your saved cash and the value of the house is still above the loan they gave you, you are both still in positive equity and it looks good on everyones books.
Banks require a xx% deposit because this is a calculated risk, it's how much they forecast that the market could fall from present value in worst case. If they choose to market products for 92% mortgages, yet aren't giving this rate to anyone (or a very few exceptions) it tells you they believe it's a bad risk for them. I guess the choice to market these product still is to catch the few "safe-bets" or to inspire market/consumer confidence.

2. What must I have to get a mortgage?
A suitable deposit that will at least cover potential market losses, as described above.
The other criteria aren't exactly that cut and dried.
I believe there are certain well known criteria without which you will certainly get rejected for: not enough income to cover all your monthly outgoings/ the mortgage repayments/ an buffer for increase in interest rates + another safety margin because no one every really knows what life will throw at them!!
They want to ensure that you are a low-risk to them and that they can safely get their money back+ the profit from interest. If you are difficultly with repayments etc this will cost them money in administration etc (oh boo hoo I hear you say!) and eat into any profit. How do they ensure you are low risk to them?
Employment: they require the you are permanent for (x)years. i.e. you have steady flow of income for them to get paid from.
Other Loans: Your income is effectively reduced by paying these, AND if things go wrong, (unemployment, or other factors that life can throw at us in a moments notice!) then they will have to compete with these other loans/lenders in squeezing money from you. Messier for them.

ooops must go for a bit............. tbc