by Mark Johnston
First time buyers are being thrown a life line as some providers start to offer 90% mortgages again. Many lenders stopped offering 90% mortgages after the financial crisis as a way of taking some of the risk out of lending. Although this helped the balance sheets of some of the countries top banks and building society it also put the UK housing market into decline as many could not finance their first home.
HSBC is one of the big players who is welcoming back first time buyers by offering 90% mortgages again. The global banking giant has launched a tracker and a fixed rate mortgage aimed at first time buyers with a loan to value ratio (LTV) of 90%. This is fantastic news for those who were struggling to raise the large deposits required to purchase a house and both only require a £99 fee.
The tracker mortgage is 3.69% above base rate which is currently 0.5% so the current cost is 4.19%. The two year fixed rate mortgage is 5.09% for those looking for the peace of mind of knowing how much their monthly repayments would be.
The great thing about these mortgages is that they only require a 10% deposit as they have a loan to value ratio (LTV) of 90%. This is a positive sign that lenders are looking to support first time buyers by lowering their expectation in terms of the amount of deposit they require.
Martijn van der Heijden, head of mortgages at HSBC said “HSBC is keen to be there for new and existing customers, whether it’s for people looking to take their first step on the housing ladder or for people looking to improve on their current deal. We think we can reduce the cost of borrowing for most people and we think that’s what people are after in these difficult times.”
Although this is a very positive step, a report by the Sunday Times recently showed that many first time buyers were being rejected for house loans. The reported showed evidence that many first time buyers who on paper should not have a problem getting finance are being rejected. The Sunday Times suggested that lenders are looking to support their customers and offer loyalty mortgages by declining many applicants who are not existing customers and do not hold their day to day banking with them.
Many applicants are being rejected by lenders even thought they appear to be ideal candidates. They are being told that they have not met the credit scoring requirements but many are suggesting that lenders are actually turning applicants down because they do not have enough history with the financial institution. As a result existing customers have access to much better deals credit.
The Sunday Times research shows a pretty dismal picture for first time buyers. Mortgagerates.org.uk have seen a trend in increasing the mortgage term for first time buyers. Many would be home owners are taking their mortgage out for over 30 years instead of the typical 25 in an attempt to lower the overall costs and make it affordable.
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