Santander gives first-time buyers new hope

Published 24th Feb 2010

Santander will today open its doors to first-time buyers of new-build property for the first time since the banking crisis began.

The UK’s second-biggest mortgage bank — formerly Abbey — will increase the maximum loan sizes for first-time buyers who want new apartments or houses in a move designed to stoke activity at the bottom of the housing ladder.

The limit for first-time buyers of new apartments will rise from 70 per cent of the property’s value to 80 per cent, while for those buying houses the limit will rise from 80 per cent to 90 per cent. The bank’s loan-to-value (LTV) limits for non-first-time buyers of newly built property will remain at 70 per cent for apartments and 80 per cent for houses.

The decision will slice thousands of pounds off the savings pot that first-time buyers need to get a loan. The move was welcomed by housebuilders, which have struggled to sell one and two-bedroom properties — typical first-time buyer purchases — because of the huge deposits that lenders have required.

The deposit needed by a Santander customer on a typical first-time buyer new-build house costing £160,000 will now be £16,000, rather than £32,000.

Commentators said the decision was a sign that lenders had a renewed appetite to compete at the bottom end of the market, after banks all but shut out first-time buyers almost two years ago. The last time Abbey lent a 90 per cent mortgage on a new-build property was in March 2008.

It was also a sign that lenders’ confidence in new-build valuations was returning, after taking a knock as a result of falls in value of up to 50 per cent for some city centre apartments.

A senior figure at a large UK housebuilder said: “This is potentially very significant. This addresses the issues of selling new-builds to first-time buyers and that is where the real issues have been.”

Stewart Basely, executive chairman of the Home Builders’ Federation, said: “Provided the terms and conditions are competitive, we know there is a huge pent-up demand for such a product.”

Santander will offer a two-year tracker at 4.99 per cent with a £995 fee up to 90 per cent, or a 5.99 per cent three-year fixed rate with a £495 fee.

The announcement comes as the first signs of a double dip in the housing market began to emerge. Housing transactions plummeted by more than 30 per cent in January, from 100,000 in December to 67,000, according to HM Revenue & Customs. Meanwhile figures from the British Bankers’ Association showed that mortgage lending fell to its lowest level since May 2009 in January, down by 23 per cent from December to 35,083, because of the bad weather and the end of the stamp duty holiday. Separate figures on the new-build market showed a 0.9 per cent decline in the average price of a new build in January.

Brokers said that while the Santander deal would benefit first-time buyers and boost competition, other lenders including Woolwich and Northern Rock offer more generous LTVs on some deals.

Source: ' Times '

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