95 Per Cent Mortgage Deals

by Mark Johnston

Thousands of first time buyers across England will be reading the reports in the press with baited breathe at the potential for a 95 per cent mortgage coming onto the market soon. 

Some of Britain’s biggest housing builders and mortgage lenders have been discussing the potential and possibility to bring a 95 per cent mortgage deal into the market.  These talks have been carried out in secret between various organisational executive managers from several FTSE listed companies.  The Council of Mortgage Lenders has been attempting to ease the supply of credit to the housing market and make some positive progress towards a more stable and growing mortgage market. 

There have been reports that some of the countries largest banks like Lloyds and Santander have been in attendance as well as some of the countries largest building societies like Taylow Wimpey, Barratt and Persimmon.  All working together to come up with a suitable mortgage product to offer first time buyers a way into the market.

A recent survey, commissioned by an insurer, revealed that 75% of Ministers of Parliament (MPs) feel that people, with stable incomes and can afford repayments should be helped onto the property ladder.  This financial assistance should be provided even when those individuals don’t have the 10-20% deposit required.

Additionally, the same survey revealed that over 83% of MPs feel that their constituents need more support getting into the housing market.  In London, it was suggested that this figure is closer to 100% of constituents will need support, a staggering figure.

This is great news for first time buyers, there is now clearly a light at the end of the tunnel, banks and building societies are also now responding.  With the deposit remaining the biggest barrier to homeownership, it’s pleasing news to see a market reaction.  The average deposit has risen from 10% to 21% in recent years but currently there are over 200 mortgage deals that will lend 90% of property value, last year there were less than 150.  These LTV deals represent only a fraction of the deals that were available before the Credit Crunch began in 2008. 

One of the ideas floated was for house builders to create a special fund where equity would be injected.  This fund would be ring fenced for each house builder and underwritten by a bank to cover the offer of a 95 per cent mortgage deal on a property.

This is a risky move by the banks who were criticized for doing just this action that lead to the credit crisis in 2007.

One house builder in attendance at the meeting described the various proposals as “a very positive sign”.

“We need 230,000 homes a year to be built and we are currently languishing at around the 100,000 level, and it is the deposit gap which is the issue,” the builder, who declined to be named, told the newspaper.

“A year ago I don’t think the banks would have been interested in this but the banking industry and the house builders have now agreed to look at this proposal with good intent.”

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