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Boost for first-time buyers as more ultra-low deposit mortgages hit the market

In a further boost to first-time buyers, more lenders are bringing 5 per cent deposit mortgages onto the market.

New deals announced by Metro Bank and Cambridge Building Society are not part of a new government-backed mortgage guarantee scheme which was launched this week to increase the availability of 5 per cent deposit loans.

Major lenders including Halifax, HSBC UK, Barclays, NatWest and Santander are taking part in that scheme and unveiled new 5% deposit products earlier this week.

Cambridge Building Society said that, from 5 May, it will launch deals including a two-year fixed-rate mortgage at 3.99 per cent, with a £199 application fee and a five-year fixed-rate mortgage at 4.09 per cent with the same fee. The maximum loan for this range is £400,000.

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Metro Bank is now offering a five-year fixed-rate deal at 3.89 per cent for borrowers looking to get on the housing ladder with a 5 per cent deposit. The maximum loan size available is £570,000.

The bank said it had already been developing its new mortgage when the government mortgage guarantee scheme was announced in the recent Budget.

Metro Bank launched into near prime residential mortgages in March, offering flexibility for borrowers who may be struggling to get a mortgage elsewhere.

Charles Morley, director of mortgage distribution at Metro Bank, said that the bank has been making a number of new hires across its mortgages business recently.

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Pandemic recovery

The number of low deposit mortgages generally available fell dramatically in the early days of the coronavirus crisis as lenders became more concerned about riskier loans and the possibility of house prices falling.

Under the new government scheme, lenders can purchase a government guarantee that would compensate them for a portion of their losses in the event of a repossession.

It mirrors a previous Help to Buy mortgage guarantee scheme, which was launched in 2013 in response to a similar shortage of low-deposit mortgages following the 2008 financial crisis.

By Michiel Willems

Source: City AM

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Mortgage lenders prepare to launch new low deposit mortgages

Mortgage lenders in the UK are preparing to launch a wave of ultralow deposit deals on to the market.

Several big high street names have already confirmed their intention to participate in a new UK government-backed five per cent deposit scheme, which was unveiled by the Chancellor in the recent Budget.

Lenders who are participating in the new scheme include Lloyds, Natwest, Santander, Barclays, HSBC UK and Virgin Money.

Some lenders are expected to reveal further details about what they will have to offer in the coming days, The Scotsman reports.

The new mortgage guarantee scheme aims to increase the appetite of lenders across the UK for high loan-to-value lending (LTV) to creditworthy customers.

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It will be available to current homeowners as well as first-time buyers looking for a property for up to £600,000. Borrowers will still need to pass the usual affordability checks.

On the whole, the scheme can be used for new or existing properties and it will be open for applications from later this month until December 31 next year.

The initiative will work by allowing lenders to purchase a Government guarantee that would compensate them for a portion of their losses in the event of foreclosure.

The new scheme will mirror a “tried and tested” initiative which reinvigorated the mortgage market in the recent past.

In 2013, the government launched the Help to Buy mortgage guarantee scheme in response to a similar shortage of low-deposit mortgages following the 2008 financial crisis. The programme helped more than 100,000 households to buy their own home across the UK.

The previous Help to Buy scheme also had the effect of boosting competition in the 5 per cent deposit bracket among lenders who were not part of the scheme.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

They ramped up their low-deposit ranges in order to compete with lenders taking part in the initiative.

Lloyds Banking Group confirmed that its new deals will be available across its brands, Lloyds Bank, Bank of Scotland, and direct from Halifax, as well as through Halifax Intermediaries.

The bank said that two-year and five-year product options will be made available.

A Santander spokeswoman said: “We’re pleased to be supporting the Government’s 95% mortgage guarantee scheme and look forward to sharing full details of the products available shortly.”

A spokesman for Virgin Money said: “We will be an active participant in the Government’s mortgage guarantee scheme and we are due to announce our proposition next month.”

Source: Scottish Construction Now

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