First-time buyers face rising mortgage rates

BANKS are hiking mortgage rates for homebuyers who can only put down deposits worth 10 per cent of the property value.

A range of lenders increased their rates on high loan-to-value mortgages last week, even though the Bank of England interest rate has remained rock bottom at 0.1 per cent.

Those worst affected will be first-time buyers, who typically borrow 90 per cent or more of their property’s value.

HSBC – one of the few major banks still taking on first-time buyers with smaller deposits – increased rates on its fixed rate 90 per cent loan-to-value deals.

Skipton Building Society increased rates on all three of its standard residential deals at 85 per cent loan to value.

TSB pushed its rate up from 2.54 per cent to 2.79 per cent for its two-year fix at 80 and 85 per cent loan to value and its five-year deal went up from 2.34 per cent to 2.59 per cent.

Co-op intermediary Platform also increased the rate on its 90 per cent loan to value, fee-free five-year fix by 0.20 and other rates up by 0.25 per cent.

David Hollingworth of London & Country Mortgages said: ‘In historic terms, these are still very low rates, but lenders are having to chop and change because of the challenges they’re facing. Demand has come back strongly and because there are so few lenders at this end of the market they need to manage business carefully.

‘If one lender pulls out, there’s a domino effect on the other lenders and it can snowball rapidly which is why we are seeing lenders dip their toes in the water and then withdraw.’