90% Mortgages - as high as mortgage lenders are prepared to go now

As the term suggests, 90% mortgages, otherwise termed as 90% loan to value mortgages, are mortgages that cover 90% of the valuation of a house. So if a home is worth £100,000 a 90% mortgage would be for an amount of £90,000.

90% loan to value mortgages may be acquired to either buy a property where you are able to supply a 10% deposit, or to remortgage a home which you already own.

So why are you not able to simply get a mortgage loan to cover the whole value of one's home? Why have you got to put down a down payment to buy a property?

Well you need to think about the significance of 'equity' to both the borrower as well as the mortgage lender. The 10% margin, the difference between the valuation of your house and the amount of mortgage loan you have secured against the residence when you take out a 90% mortgage loan, is referred to as your 'equity'. It can be regarded as the 'value' that you have stored up in your residence asset. If you were to sell your home - this is the amount of money you would obtain following the sale.

In the event that the market value of your property falls to less than the total sum of mortgage borrowing you've got against your property - this is referred to as a 'negative equity situation'. In other words, you will owe an amount more than the valuation of your house and your property is now a 'liability' instead of an 'asset'.

So why is negative equity a problem? Well, a negative equity scenario poses a risk for both the lender and also the mortgage borrower. The lender always holds a legally binding charge over your residence when they provide you a mortgage. In the event that you go into default on your mortgage loan repayments, the lender then has the legal right to repossess your home and sell it in order to recover the debt. If the home is worth lower than the debt (mortgage) - then they will not be able to recover the total debt and will suffer a loss. It's 'equity' in your property which protects lenders against the risk of mortgage lending.

The unfavourable consequences for you, the mortgage borrower, include being stuck unable to sell your property if you ever wanted to - unless you are able to come up with the further cash necessary to repay your mortgage in its entirety.

Before the credit crunch, 90% mortgages were commonly available. As the housing market was on an upwards curve, the likelihood of a 90% mortgage slipping into negative equity seemed remote. It was much more likely that the margin of equity would increase instead of decrease. But ever since the credit crunch, and the resulting economic down turn - the housing market has at best stagnated, and in numerous regions of the uk house prices have fallen significantly.

With concerns of additional house price falls moving forward, and the more limited funds available to mortgage lenders due to the liquidity limitations, 90% LTV mortgages are as high as mortgage lenders are prepared to go. Gone are the days when it was achievable to get mortgage loans at 95%, 100% or even more than 100% of a properties worth. Mortgage lenders have drastically tightened the criteria around 90% mortgages - causing them to be considerably more hard to acquire. In fact, the amount of 90% Mortgages approved by mortgage lenders reduced by 90% from 245,000 in 2006 to merely 28,000 in 2009.

In the future, I am positive 90% Mortgage loans will come back to greater availability - but this may perhaps not occur for quite some time. And until it does - the property market is likely to stay in a spiral of stagnation, with a fewer number of first time buyers feeding into the system.