State banks clobber first time buyers with high mortgage rates

Published 11th Aug 2010

First-time buyers are being hit with high mortgage rates by State-backed banks Lloyds and RBS.

Cheltenham & Gloucester offers those with a 10 per cent deposit a two-year fix of 6.99 per cent with a £895 fee, while Halifax offers 6.79 per cent with a £497 fee. Both are part of Lloyds, which made a £1.6 billion profit in the first half of this year.

RBS and Natwest offer borrowers with a 10 per cent deposit a five-year fix at 6.89 per cent with no fee.

‘First-time buyers should shop around and consider these rates only as a last resort,’ says Aaron Strutt of broker Trinity Financial Group.

The good news is that some building societies have competitive rates.

Yorkshire’s two-year fix is 4.95 per cent with a £995 fee for those with a 10 per cent deposit, while Nationwide’s two-year fix is 4.69 pc, with a fee of £995, for those with 15 per cent deposit. Existing borrowers can remortgage at this rate if they have 10 per cent equity.

Yorkshire borrowers with a typical £150,000 mortgage would pay £873 a month, while C&G customers would pay an eye-watering £1,059.

The total cost over two years for a Yorkshire customer would be £21,947, while C&G would be £26,311.

‘To access the best rates, borrowers still need equity of at least 25 per cent - the bigger the deposit, the better,’ says David Hollingworth of broker London & Country. ‘There is much less competition for those with a equity of 10 per cent or even 15 per cent, making it even more important to scour the market.’

Source: ' Daily Mail '

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