First-time buyers offered hope with new mortgage deal

Published 09th Jun 2009

Britannia launches new 90 per cent LTV deals while Nationwide widens range of 95 per cent LTV deals for existing customers


The mortgage market has been boosted by competitive new deals from two lenders aimed at borrowers with only a small deposit or equity stake in their home.

Britannia, which recently merged with the Co-Operative Bank, has announced new home loans available up to 90 per cent of a property's value. From tomorrow it will offer a two-year fixed up to 90 per cent loan-to-value (LTV) with an interest rate of 5.09 per cent and a fee of £599. It is also offering a three-year fixed-rate deal with a rate of 5.59 per cent.

Mortgage deals which only require a small deposit are seen as vital to helping first-time buyers on to the property ladder and reviving the housing market. There are only six deals for first-time buyers available up to 95 per cent LTV with rates typically above 6.5 per cent.

David Hollingworth, of London & Country Mortgage, the broker, said: "It is extremely encouraging that Britannia has returned to the 90 per cent LTV market and come up with market leading rates. The two-year fix is considerably more attactive that the next best deal from HSBC."

Meanwhile, Nationwide, Britain's biggest building society, has unveiled an expanded range of mortgages for existing borrowers which are available up to 95 per cent LTV.

From Wednesday, it will be offering a two-year fixed-rate deal with an interest rate of 2.79 per cent for loans up to £150,000. It has a fee of £2,499, although deals with smaller fees or larger loan amounts carry higher rates of interest.

It is also offering new base-rate trackers up to 95 per cent LTV. It will also cap its new tracker rates to protect borrowers from a steep rise in interest rates, expected next year.

The new trackers include a two-year deal pegged at 2.49 per cent above base, a current pay rate of 2.99 per cent, with a fee of £599 and is available on loans up to £150,000. The rate is capped at 3.99 per cent.

Andy McQueen, mortgage director at Nationwide, said: “Borrowers will have the opportunity to fix their mortgage deal at a lower rate or to take a variable rate product with a cap. As well as being able to choose from a wider product range, the new capped trackers will give customers the added assurance that their payments will not go beyond a certain level should interest rates rise during their deal term.”

There are few deals available to new borrowers up to 95 per cent LTV but the rates remain higher than the Nationwide standard variable rate (SVR), which is currently 2.5 per cent. Thousands of Nationwide customers have chosen to revert on to the mutual's SVR in recent months, which is the lowest in the market.

Mr Hollingworth added: "It is difficult to compare a fixed and standard variable rate. These new lower rates improve the options for existing borrowers, who will have the security of locking into a fixed rate deal."

However, while higher rates are finally falling for borrowers with the smallest deposits, brokers have warned that the historically low interest rates for cash-rich borrowers are set to climb, prompting calls for homeowners to lock into a fixed-rate mortgage deal soon.

HSBC, Britain’s biggest bank, Chelsea and West Bromwich building societies have hiked interest rates on their most competitive five-year and ten-year deals over the last three days.

The lenders have blamed a sharp rise in the cost of wholesale funding on moneymarkets. Five year-swaps, which dictate the cost of fixed-rate mortgages, have risen from 3.25 per cent to 3.49 per cent in the last fortnight.

Chelsea was forced to raise the rate on its new five-year fix only three days after it was launched. It is increasing the rate from 4.34 per cent to 4.5 per cent on Saturday. The deal is only available up to 65 per cent LTV with a fee of £995.

HSBC pulled its five-year fix with a rate of 4.39 per cent today, replacing it with a 4.99 per cent deal.

The sixth biggest lender launched its Rate Matcher offer today, which allows existing borrowers to match or beat their current mortgage rates and fix it for up to five years. Interest rates start from 2.49 per cent, but fees can be as high as £4,699. The deals are available up to 75 per cent LTV.

West Bromwich also hiked its five-year fix by 0.45 percentage points, to 5.44 per cent on Monday.

Mortgage brokers say homeowners should secure a deal now before rates rise further. Richard Morea, of London & Country Mortgages, the broker, said: “The movements in moneymarkets indicate that costs are only going to be rising for lenders and that will be passed on to borrowers in the form of higher interest rates.”

Source: ' Times '

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