Money Insider: At last, decent loan rates for first-time buyers - Spend & Save - Money - The Independent

Money Insider: At last, decent loan rates for first-time buyers

 

Only a fortnight ago I was using this column to moan about how the cheap government money available from the Funding for Lending Scheme (FLS) wasn't reaching those who needed it most.

The market has been awash with rate cuts and super-low-cost deals for those fortunate enough to have a 40 per cent-plus equity stake in their property, and until now lenders have decided to play it safe with the higher-risk end of the market.

That all changed on Tuesday, when Co-operative Bank launched a two-year fixed-rate mortgage priced at just 3.99 per cent, which is available even for those who can offer only a 10 per cent deposit.

The next-best deals on 90 per cent loan-to-value (LTV) loans lag some way behind, with Chelsea Building Society at 4.19 per cent and a £1,495 fee, and Market Harborough Building Society at 4.2 per cent and a £395 fee.

It's excellent news to finally see FLS money being used to help those trying to get on the first rung of the housing ladder, particularly when you compare the new Co-op rate with what was available on the market just a couple of months ago.

In late August the cheapest 90 per cent LTV, two-year, fixed-rate was 4.84 per cent plus a £495 fee from Yorkshire Building Society. On a £120,000 mortgage (25-year term) you'd have paid £690 per month for 24 months, whereas with the substantially lower 3.99 per cent rate the monthly repayment falls to £632.

Over the course of the two-year term, allowing for interest rates and product fees, the borrower will save £1,887, which is a really useful saving for someone who is in the early years of home ownership. The cash saved could be used for decorating and do-it-yourself projects, or maybe to buy white goods and home furnishings. Either way it's good news for retailers as well as the broader UK economy.

Providing higher-LTV mortgage products involves lenders having to set aside more capital reserves than with a lower risk 60-75 per cent advance. However, access to cheap finance via FLS will have diluted the overall cost to the Co-op of providing this 90 per cent LTV finance.

John Sexton, a mortgage expert at Moneynet.co.uk, welcomed the move. "With Co-operative Bank pledging to lend the equivalent of £1m per day to first-time buyers in 2012, hopefully this will be a catalyst and encourage other lenders to follow suit," he said. "The focus needs to shift away from the saturated 60 per cent LTV 'lending safe haven' to delivering real and affordable home-loan options to those who really need it."

The real test will be to see how long these rates hang around, and whether they create a domino effect with rate cuts from the big high-street rivals.

Don't suffer later for an early Christmas payday

It's less than 50 days to Christmas, so it's a good time to make sure your bank balance will be able to cope with the additional financial strain.

It's the most expensive time of the year for most of us, so it's a great help if your employer enters into the spirit and stumps up your December salary a week or two in advance.

The downside of getting paid that bit earlier means it's even easier to lose track of all those debit card transactions and direct debits, particularly when your next payday could be up to six weeks away.

Failing to keep a close watch on your current account balance and adopting a "worry about it later" attitude could see you exceed your overdraft limit and face a big bank charges bill early in 2013.

If you don't already have an agreed overdraft in place or you think you could do with a little more financial breathing space over the festive period, speak to your bank or building society now to arrange an authorised overdraft sufficient to see you through to the end of January.

It's usually a pretty pain-free process and can be arranged very quickly, either online, by phone or face-to-face at your local branch.

Once you've got your safety net arranged, make sure you check your account on a frequent basis to avoid being hit with bank charges – there's no excuse not to these days with the information available 24/7 online, on your smartphone or via an ATM.

Some banks charge overdraft fees daily, others charge monthly, some do both, but whichever tariff you're signed up to, it can end up hitting your pocket hard.

If you keep on top of your spending and stay within your agreed limit then the charges you incur will be minimal, and at least you won't give the banks the chance to take the shine off your Christmas and New Year celebrations.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Sport
FootballFull debuts don't come much more stylish than those on show here
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
PROMOTED VIDEO
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Travel
travel
News
The ecological reconstruction of Ikrandraco avatar is shown in this illustration courtesy of Chuang Zhao. Scientists on September 11, 2014 announced the discovery of fossils in China of a type of flying reptile called a pterosaur that lived 120 millions years ago and so closely resembled those creatures from the 2009 film, Avatar that they named it after them.
SCIENCE
Life and Style
tech
Sport
David Moyes and Rio Ferdinand
FootballRio Ferdinand on why the former manager failed at United
Arts and Entertainment
Matisse: The Cut-Outs exhibition attracted 562,000 visitors to the Tate Modern from April to September
art
Life and Style
Models walk the runway at the Tom Ford show during London Fashion Week Spring Summer 2015
fashionLondon Fashion Week 2014
News
Kenny G
news
News
peopleThe black actress has claimed police mistook her for a prostitute when she kissed her white husband
News
i100
Life and Style
techIndian model comes with cricket scores baked in
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Training Coordinator / Resource Planner - City, London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

    Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

    £400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

    Day In a Page

    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week
    The fall of Rome? Cash-strapped Italy accused of selling its soul to the highest bidder

    The fall of Rome?

    Italy's fears that corporate-sponsored restoration projects will lead to the Disneyfication of its cultural heritage
    Glasgow girl made good

    Glasgow girl made good

    Kelly Macdonald was a waitress when she made Trainspotting. Now she’s taking Manhattan
    Sequins ahoy as Strictly Come Dancing takes to the floor once more

    Sequins ahoy as Strictly takes to the floor once more

    Judy Murray, Frankie Bridge and co paired with dance partners
    Wearable trainers and other sporty looks

    Wearable trainers and other sporty looks

    Alexander Wang pumps it up at New York Fashion Week
    The landscape of my imagination

    The landscape of my imagination

    Author Kate Mosse on the place that taught her to tell stories