Money Insider: Mortgage rates tumbling for those with 40% or more deposit

 

Interest payments on fixed-rate mortgages are tumbling to record levels for those fortunate enough to have a decent-sized stake to put down, while borrowers with smaller deposits are being ignored.

This week, NatWest became the third major lender in the last fortnight to launch a five-year, fixed mortgage with a rate below 3 per cent, but only if you have a 40 per cent deposit. There is a massive fee of £2,495 payable, but despite this, if you're looking to borrow £100,000-plus it offers good value and the chance to fix your repayments at an unprecedented low level until the summer of 2017.

The NatWest deal follows similar launches from HSBC at 2.99 per cent with a £1,499 fee and Santander at 2.99 per cent and a £1,495 fee, although the latter is only available to existing customers. On Wednesday, Nationwide rushed out an ever lower rate - 2.89 per cent - but only for four years. Again, you'll need a 40 per centr deposit and the arrangement fee is £900.

The reasons we're seeing these record low rates starting to appear are down to a combination of lower swap rates, a fall in Libor and the imminent introduction of the Government's new Funding for Lending Scheme.

This latest, multi-billion initiative from Whitehall is designed to offer low-cost funding to banks and building societies to be passed on to businesses and individual borrowers. It's good to see lenders offering previously unheard of longer-term, fixed-rate mortgages, but we need to see rate cuts for those with a smaller deposit.

The housing and mortgage markets have been in the doldrums for over four years and need a boost from the bottom rung upwards. The NewBuy scheme was introduced by the Government earlier this year, but is restricted to specific, new-build properties.

If there's going to be any upsurge in the number of mortgage transactions, lenders need to apportion some of the new Funding for Lending cash towards the first-time buyer market.

The difference in interest rates between the haves and have-nots as far as equity goes is massive, and although additional risk and capital requirements have to be factored in by lenders, there needs to be a greater focus on the first-time buyer segment of the market.

While a borrower with a 40 per cent stake borrowing £120,000 at 2.95 per cent (assuming an overall, 25-year term) will enjoy repayments of £566 per month, the monthly commitment for those with a smaller stake, and frequently a tighter budget, is far more onerous.

For example, with a 20 per cent deposit, the leading, five-year rate is 3.99 per cent (with £195 fee) from Monmouthshire Building Society. The same £120,000 will cost £633 per month and if your equity is limited to 10 per cent, even the most competitive rate of 4.99 per cent from First Direct will mean paying £701 per month.

Admittedly the cost differential is not quite so stark once you take into account the £2,495 fee on the NatWest mortgage which works out at just over £41 per month over the five-year deal, but the gap still needs to be narrowed.

It appears some lenders are competing for "low-risk" customers with headline rates, while leaving the wider market under-serviced.

Hopefully, as more providers make use of the Funding for Lending scheme we'll see better deals across the full spectrum of mortgages, otherwise there will be little positive impact on the mortgage market and a wasted opportunity to boost the wider economy.

Free mobile broadband initiative from Samba

The mobile broadband market is dominated by a few major players, however, increased competition and advances in technology have seen costs fall sharply in the last few years.

Earlier this month, a new entrant, Samba, launched a service offering free on-the-go broadband for laptops, netbooks and iPads. Sounds too good to be true? Well, you're not going to get something for nothing, there is a trade-off, but one that should go down well with cost-conscious mobile web users. You pay a one-off, £5 fee for a SIM or £25 for a Dongle and SIM, and earn credit for watching video advertisements.

Watching 2.5 minutes of adverts per day earns almost 520mb of data per month, which could save £8-£10 compared with a conventional, mobile broadband contract. Samba uses the mobile-data network from Three and works on all popular browsers with the exception of Internet Explorer.

You choose when and what to watch, and while this service won't suit everyone, with around 7m adults using broadband on-the-go, there's unlikely to be a shortage of new customers.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn