Tweet
Obtaining a mortgage became a little easier yesterday as a second big lender announced it was cutting the size of deposit required from borrowers applying for its cheapest mortgages.
HSBC is increasing the amount it will lend as a proportion of the value of the property being mortgaged - the loan-to-value (LTV) ratio - to 75% for its lifetime tracker. The mortgage, which charges 2.45% above the base rate, was previously only available with a 60% LTV ratio. Last week, Woolwich increased the LTV ratio on its lifetime and offset trackers from 60% to 70%.
HSBC, which lends about 10% of mortgages in Britain, said the move had nothing to do with attempts by the government to encourage banks and building societies to lend again. A spokesman said: "Our customers have asked for this and we have good liquidity, which means we have the money to lend. For every £1 that we lend, we have £1.20 in savings."
The bank estimates that widening its maximum LTV percentages to 75% on some of its mortgages means that 2 million more homeowners can now apply for them.
Early last year, borrowers were still able to get mortgages worth more than 100% of their properties' values. But the onset of the credit crunch saw lenders pull mortgage products and tighten lending criteria. By the end of 2008, most were reserving their best deals for borrowers with a 40% deposit.
David Hollingworth, of the mortgage broker London & Country, said the move to increase LTV ratios was encouraging, and that first-time buyers had been helped by the fall in house prices. But he said it was still difficult for most to find a deposit of 25%. "Loans are available up to a ratio of 95%, but the interest rates will make you weep," he said.
Abbey will lend up to 95% of the value of a property but charges a fixed rate of 7.09% for five years with a £2,499 application fee. The Yorkshire Bank's first-time buyer's mortgages are slightly more competitive, charging 6.99% fixed for three years with a 95% LTV ratio, or 5.99% for the same period with an LTV ratio of 90%. Both loans have a £599 fee.
First-time buyers are traditionally considered the engine of the housing market. Without their purchase of flats and small houses, homeowners are unable to move up to bigger and more expensive properties.
But figures compiled by the Council of Mortgage Lenders and BankSearch regulated mortgage survey show the number of first-time buyer mortgages more than halved last year compared with a year before, from 18,000 to 8,900. At the same time, the average loan size dropped and the average LTV fell from 89% to 76%.
guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
