View the article online at http://citywire.co.uk/money/article/a612638
First-time buyers starved of mortgages
Despite the government's £80 billion Funding for Lending scheme, the number of low-deposit mortgages on offer is falling, says Lorna Bourke.
Whatever happened to social responsibility?
The mortgage lenders are lapping up the cheap funds made available to them under the £80 billion Funding for Lending scheme that was launched on 1 August.
Bank of England statistics on take-up by lenders will not be available until 3 December, but so far there is precious little evidence that this cheap money is reaching first-time buyers and other would-be homebuyers with small deposits – the borrowers who underpin the market.
Low-deposit lending in decline
‘The number of 90% and 95% mortgages has actually fallen over the past six months,’ confirms Clare Francis, mortgage expert at Moneysupermarket.com. ‘This is not what we expected.’ The figures are pretty damning. Moneysupermarket’s research shows that six months ago there were 49 loans available at 95% loan to value (LTV).
Today the number is just 27, and 90% loans have fallen from 318 to 244.
And the building societies, which traditionally trade on their commitment to support first-time buyers, have been pulling out of the high LTV market. Six months ago Ipswich, Nottingham, Skipton and Cambridge building societies were all in the 95% market – but have since pulled out.
No silver bullet
‘I don’t think Funding for Lending will be a silver bullet, although we have seen rates coming down at the lower risk end of the market,’ confirms Peter Gettins, product manager at fee-free mortgage broker London & Country.
‘There have been a couple of new products aimed at first-time buyers. Newcastle Building Society has just launched a five-year fix at 5.99% for loans up to 95% with a fee of £690 and Melton Mowbray Building Society has a three-year fix up to 95% LTV at 5.49% with a fee of £998 available for first-time buyers only.
‘But the whole EU situation still overhangs the market – house prices are falling and lenders must hold more capital against the risker high LTV loans.’ Gettins believes that what Funding for Lending might do is allow the lenders to carry on lending if the euro collapses and disaster strikes.
July figures from the Council of Mortgage Lenders showed a modest improvement in mortgage lending, but this was from a relatively low June level, and life is no easier for those with a small deposit – in spite of the billions of cheap money made available to lenders.
First-time buyers left out in the cold
David Newnes, director of LSL Property Services, owners of estate agents Your Move and Reeds Rains, said 'it’s not an easy time for first-time buyers, who still face significant barriers when it comes to securing mortgage finance.
'Hefty deposit requirements remain too big an ask for the vast majority of potential buyers.’
He points out that pressure is mounting on the Funding for Lending scheme to boost activity at the lower end of the market. ‘But there is no guarantee that lending will be diverted to those without substantial equity. Lending needs to focus on helping meet the needs of those lower down in the housing market if serious change is to emerge.’
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