Money Insider: New first-time buyer focus from Barclays and Virgin Money
Friday 18 January 2013
If the first two weeks of the new year is a taster of what's to follow, the mortgage market will be the sector where banks and building societies focus much of their efforts in 2013. There has been a slow but steady fall in mortgage interest rates since the Funding for Lending scheme was introduced last autumn, but lenders are suddenly becoming far more aggressive with their pricing in order to maintain a decent market share.
In the last fortnight we've seen rate cuts from Yorkshire Building Society, Nationwide Building Society and Leeds Building Society, but the high-profile moves by Barclays, slashing rates by up to 1%, and Virgin Money cutting some 90% LTV deals by up to 1.30%, reflects the increased desire for new business.
The stand-out new products include a two-year fix from Yorkshire BS at 1.99% with £995 fee for loans of 60% LTV, but it's the renewed appetite to help first-time buyers that's most encouraging.
It's not just a matter of cheaper deals from mutuals for those with a stake of 10% or less, we are starting to see cheaper deals and more innovation from the big banks too.
Barclays is a prime example, and has just launched its excellent new Family Springboard mortgage for first-time buyers with just a 5% deposit.
The home buyer has to find a 5% stake and their parents/family deposit must deposit a further 10% of the purchase price in a linked Barclays Helpful Start savings account for three years.
In return, the borrower gets a three-year fixed mortgage rate at 4.69%, and the family earns base rate plus 1.50% AER (currently 2% AER) on their savings. At the end of the three-year mortgage deal the savings will be returned with interest, provided the mortgage payments are kept up to date.
Although first-time borrowers with small deposits need to be aware that they are more susceptible to negative equity issues, with rental costs still soaring there will be no shortage of takers for this new Barclays deal.
It's never been an issue of not being able to afford the ongoing monthly repayments; it's finding the deposit that's proved the insurmountable hurdle for many.
Research released this week by Castle Trust revealed that even in the cheapest areas for housing a 20% deposit means having to save up around £15,000, and even excluding London there are many areas where you'd need to amass between £30,000 and £40,000, so it's easy to see the need for innovative solutions.
The Barclays Family Springboard deal is similar to the Lend a Hand initiative from Lloyds TSB, where although the mortgage rate is slightly lower, at 4.4%, it requires a more onerous 20% stake from family members, and therefore is out of reach for some parents.
With Virgin Money slashing rates on 90% home loans too, there's growing evidence that lenders are starting to move away from the safe haven of 60% LTV lending to a less congested higher risk market where better margins can be found. It's positive news for those who still have a dream of home ownership, and hopefully this focus on borrowers who have been crying out for affordable options will provoke a reaction from other high street lenders.
The competition for new business is good for existing borrowers too, and for anyone still on their lender's standard variable rate (SVR), now is a good time for a serious look at some of the lowest fixed rates we've ever witnessed.
With the average SVR at 4.6% APR, there are potentially big savings to be made and the opportunity to lock in at much cheaper rates for up to 5 years, so speak to an independent mortgage broker to check out what deals may be suitable for your circumstances.
Will loan rates dip below 5%?
The battle between personal loan providers rumbles on, particularly for borrowers with an A1 credit score. Tesco Bank and Clydesdale/Yorkshire Bank have been the front runners this year, with the latter cutting its rate to its lowest ever level at 5.1% APR for loans of £7,500 plus. Two years ago, the best deals were around 6.7% APR. While the cost of larger loans is falling, those looking for smaller sums of £2,000 to £3,000 still face rates of between 20% APR and 30% APR in some cases, so it's worth checking out peer-to peer lenders such as Zopa or RateSetter for cheaper deals.
Andrew Hagger is a personal finance analyst at moneycomms.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
- 2 To help fuel their propaganda machine against the poor, our government has now decided to redefine the word 'welfare'
- 3 Bill Cosby: Isn’t it obvious why his accusers have stayed silent up until now?
- 4 Halle Berry takes ex-boyfriend Gabriel Aubry to court for allegedly trying to make daughter look less African-American
- 5 Isis propaganda image showing 'abuse of Muslim woman by soldiers' is actually taken from Hungarian porn film
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Revealed: How the world gets rich – from privatising British public services
Exclusive: UK approved £7m Israeli arms sales in six months before Gaza conflict
iJobs Money & Business
£Attractive: Citifocus Ltd: High calibre individual with significant product d...
£Negotiable: Citifocus Ltd: Leading global bank seeks experienced credit analy...
£Attractive Package: Citifocus Ltd: High calibre individual with a high degree...
£Attractive: Citifocus Ltd: High calibre individual with superior academics an...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens