First-time buyers given mortgage boost

Published 13th May 2010

The Post Office has launched a 90% loan-to-value mortgage in a sign that rates for first-time buyers are improving


First-time buyers struggling to scrape together a deposit for their first home were given some welcome news today with the launch of a market leading mortgage.

The Post Office has stepped into the 90% loan-to-value (LTV) market offering a two-year fixed rate at 5.45% with a £999 fee.

The move comes more than a year after former business secretary Lord Mandelson originally announced that the Post Office would become a new "people's bank" offering a wider range of financial products.

Details of those products were announced in March, with Mandelson specifically referring to the imminent availability of a 90% mortgage range.

The two-year fixed-rate deal trumps a similar offering recently launched by the Co-operative and Britannia, which have just made a return to 90% lending. They have a two-year fixed-rate mortgage at 5.49%, also with a £999 fee.

For those who want to fix for longer there is little difference at 90% LTV between the interest rates offered at two and five years. The Post Office five-year deal, for example, is fixed at 5.99% with a £999 fee.

The best three-year fix for a borrower with a 10% deposit comes from Santander at 5.99% with a £495 fee.

David Hollingworth at mortgage brokers London & Country said: "These new deals are good news for first-time buyers as they are exactly what we need to coax other lenders into the market."

"However, despite these deals being a good half-a-per cent cheaper than the competition, I am not sure borrowers will see them as competitive."

Mortgage rates drop considerably even for those with a 15% deposit, he added, while those with a 30% deposit can get fixed rates as low as 2.99%.

However, for those with small deposits rates are improving. The Post Office has also launched a 90% tracker deal at the Bank of England base rate plus 4.99%, giving a pay rate of 5.49%. However, that deal can be beaten by a lifetime tracker from the HSBC which is currently at 3.99% over base rate.

Hollingworth said: "First-time buyers after certainty of repayments should opt for a fixed-rate deal. If they do opt for a tracker they need to consider how their repayments would change if interest rates went up."

"Buyers also need to be aware that unless house prices start to rise they could remain on a high LTV for some time, which will give them a limited choice when they come to remortgage."

Source: ' Guardian '

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