First-time buyers boosted by 5% deposit mortgages
Variety of new products launched under Government’s new mortgage guarantee scheme, writes Vicky Shaw
More lenders are launching 5% deposit mortgages onto the marketinafurtherboosttofirsttime buyers.
New deals announced by Metro Bank and Cambridge Building Society are not part of the newly-launched Government-backed mortgage guarantee scheme to increase the availability of 5% 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 saidonThursdaythat,fromMay 5, it will launch deals including a two-year fixed-rate mortgage at 3.99% with a £199 application fee and a five-year fixed-rate mortgageat4.09%withthesame fee. The maximum loan for this range is £400,000.
Metro Bank is now offering a five-yearfixed-ratedealat3.89% for borrowers looking to get on the housing ladder with a 5% deposit.
The maximum loan size available is £570,000.
The bank said it had already been developing its new mortgagewhentheGovernment mortgageguaranteeschemewas announcedintherecentBudget.
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: “As one of the only lenders to consistently remain in the higher LTV (loanto-value) market throughout the coronavirus pandemic, we’ve been working hard to launch into 95% LTV residential mortgages.
“Our customers will benefit from a competitive five-year fixed-rate. We’ve also been making a number of new hires across our mortgages business recently, offering specialist lending expertise as we look to appeal to an ever wider range of mortgage customer.”
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.
Katie Brain, a banking expert at financial information business Defaqto said: “When the pandemic started, all the mortgage deals for first-time buyers and those with small deposits just disappeared.
“Many who had saved hard for a deposit found themselves unable to get finance and were effectively shut out from the property market.
“Although there have been a few products that been briefly available during the pandemic, this is the first time that we have seenmainstreamlendersinthe high LTV (loan-to-value) market in nearly a year.”