Offers of Help to First Time Buyers in a Subdued Market

by Mark Johnston

Banks and building societies are predicting a pretty slow mortgage market for the remainder of 2010. The Council of Mortgage Lenders announced that just over £13 billion had been lent in the first half of the year but were not expecting any increases in the second half.A spokesperson at the Council of Mortgage Lenders (CML) said: “The £13 billion of lending includes both remortgages as well as house buyers and is up on previous months figures but we are expecting a subdued market”.

They went on to say that: “The recovery in the housing market in the second half of 2009 had “run out of steam” at the start of 2010”.

The lack of buying activity compared to last year is probably down to the current around of government cost cutting. Many potential buyers and home movers are delaying looking for property until they are a little more certain on whether they will be affected by the changes.

First time buyers are still finding it hard to get mortgages that are both well priced and no not require a large deposit. Some lenders are moving towards offering better rates for mortgages with lower deposits but loan to value is still around 80% and the best rates only available to those with 40% deposits.

The Post Office has launched a 3.94% deal that is fixed for 2 years and only requires a 15% deposit as the loan to value is 85%. Since Mortgagerates.org.uk reported on this a few weeks ago and warned prospective customers to take account the high fees the Post Office have reduced their fees making it the cheapest 85% loan to value mortgage on the market.

The Yorkshire Building Society is still offering one of the cheapest 2 year fixed options on the market. The mortgage is 3.99% again with a loan to value of 85%. It has a £995 fee and the cost for comparison is 5% APR.

Andrew Montlake, of mortgage broker Coreco, said the home loan landscape was “by no means close to returning to normal”.

“Mortgage lending criteria have toughened, making it difficult for borrowers, particularly the self-employed and first-time buyers who are struggling to obtain the borrowing they require,” he said.

“Consumer demand will begin to rise again after the traditional summer lull, with buyers keen to take advantage of low interest rates and a softening of house prices, but I would expect the rest of the year to remain pretty subdued as lenders continue to err on the side of caution.”

The Bank of England have suggested that interest rates may remain low for some time yet so homeowners will benefit whilst home movers struggle. Paul Samter an economist said: “The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates,”



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