The 90 per cent mortgage is back on the high street
Friday 04 March 2011
Could first-time buyers be back in business? The lot of FTBs has been a rough one during the past three years since lenders – fearful of defaulting borrowers and negative equity amid a stagnant housing market – have tightened the reins on home loans.
On top of the need to find deposits of at least 15 per cent to qualify for an affordable mortgage, those seeking their first home are also regularly thwarted by rigorous credit score tests as well as the ever-present hurdle of high property prices.
Yet the past few days have offered new hope to those trying to clamber on to the bottom rung of the property ladder.
A small but steadily-growing number and availability of 90 per cent "loan-to-value" mortgages are being marketed, allowing a FTB with a 10 per cent deposit to buy again.
According to Moneyfacts financial data researcher, some 214 home loans at this LTV ratio are now on offer, more than double the 94 available in February 2009. Pre-crunch, this figure hovered at around 900 loans.
The lenders in business include Northern Rock (pictured above), creator of the controversial pre-recession "Together" home loan that effectively lent you 125 per cent of your property's asking price.
Its new range of 90 per cent LTV deals includes a two-year fix at 5.99 per cent, three-year fix at 6.49 per cent and a five-year fix is 6.59 per cent – and doesn't charge a typical £900-£1,100 fee, making them appealing to borrowers trying to build up a sizeable deposit.
Cheaper rates are also available elsewhere; for a two-year fix at 90 per cent LTV, Newcastle building society offers 5.15 per cent but charges an £895 fee, while Santander will newly lend at a higher 5.45 per cent plus a small £99 fee.
Alternatives for FTBs have mushroomed too. Some, such as Lloyds TSB's "Lend-A-Hand" deal let parents inject their own savings as backing to boost their offspring's buying power.
Others have seen lenders work with housing developers in an attempt to snare first-time buyers interested in new-build homes. These include Barratt Developments (pictured below), whose deal with Hitachi Capital permits a loan of up to £50,000 to parents to cover a child's deposit for a Barratt home.
Yet, better-stocked mortgage shelves won't necessarily translate into more FTB buyers, warns Moneyfacts spokeswoman Michelle Slade: "Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they will accept," a point underscored by continuing low numbers of FTB purchases, according to research by Nationwide building society.
David Hollingworth at broker London & Country agrees that affordability is the main issue and explains that while new rates might be marginally more competitive than the typical six per cent FTB loan offer, "this isn't a price war by any means".
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