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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.

First-time buyers starved of mortgages

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 ‘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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30 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Aug 21, 2012 at 13:03

"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"

Over what period have the 90% loans fallen from 318 to 214? doesn't quite make sense when you are saying there are only 27 loans available overall

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Anonymous 2 needed this 'off the record'

Aug 21, 2012 at 13:07

No one wants cheap debt from the Government, funded by higher taxes or inflation, what is wanted is less government and lower taxes, which will lead to more jobs.....

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alex dekker

Aug 21, 2012 at 13:44

> Over what period have the 90% loans fallen from 318 to 214? doesn't quite

> make sense when you are saying there are only 27 loans available overall

27 is the current number of 95%LTV available.

244 is the current number of 90%LTV available.

I don't know where you've got 214 from.

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DDR via mobile

Aug 21, 2012 at 13:45

The problem is simple to solve.

House prices have trebled over 10 years, wages gone up by max 50% over ten years. Inflation has gone up 100% over ten years though the bids would like us to thibk overwise. So salaries to 40% or so out if sync with inflation so need to rise over the next 10 years above inflation to catch up and house prices need to stay flat for longer or fall by further 30% bring salaries back inline with house prices and the cost of living. Right now it's a mess and with the government meddling with salaries by fiddling inflation but also subsidising wage growth with working tax credits it's simply made the problem worse.

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John Lacy

Aug 21, 2012 at 13:47

Why doesn't everybody stop whinging and harping back to 2006/2007.

We have to work in the world as it is and not how we would like it to be. if first time buyers have to get a minimum of say a 15% deposit to get a half decent deal then everyone should be reinforcing this to them at every opportunity. This will entail some of them not going on holiday, possibly moving back in with parents and even not going out 5 nights a week.

I think its called priorities

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William Phillips

Aug 21, 2012 at 13:47

We ought to get back to the good old days of 80% as the standard advance, with two years' min. saving towards the deposit to show responsibility, no allowance for a 'partner's' income in fixing the multiple, and strictly straight repayment terms only-- 20-25 years for most borrowers.

If that means more FTBs are going to have to wait and rent longer, tough. They can make the sacrifice-- their grandfathers were asked to risk life and limb for their country.

The debt-sodden lunacy of the British economy has to be purged somehow.

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Aug 21, 2012 at 14:21

The problem is more fundamental that shortage of mortgages. It's the number of people in the country and the number of houses in the country. There isn't a mass of un-lived in properties so making mortgages more available to a certain section of the community will only change level of ownership in that community at the loss to another section of the community. Or just a rise in house prices. It won't mean there are more homes for people to live in.

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John Lacy

Aug 21, 2012 at 14:35

Jonathan----I know cwhere you are coming from but the basic fact is that there are hundreds of thousands of empty properties in the country in various stages of disrepair. The problem is that the houses aren't where the jobs are---I think spreading the remaining government controlled jobs out to the ares where there id available housing stock would solve an awful lot of supply and demand issues

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John Lacy

Aug 21, 2012 at 14:36

Sorry for my last illiterate post---I made the mistake of thinking that I could touch-type----oops

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Aug 21, 2012 at 14:42

To sound a rather different note: Are not we, that is the general public, house buyers, home movers, agents, builders, Uncle Tom Cobbley and All by now thoroughly fed up with the Banks and conventional financial institutions?

The Bankers just sit on the money we the taxpayers give them - on the insistence that they lend to get business, the housing market and the economy moving - just a little, only to find they stuff it under their own proverbial mattress.

The construction industry, in particular, as well as buyers and vendors are fed up with the banks, now that they have been on Lending Strike for three years.

We have to Kick out the Jams.

Why not, for instance, consider mechanisms to facilitate Seller Financing?

There must be a modest proportion of vendors of all kinds who could consider this, especially if off-the-shelf legal packs and insurance/ guarantee mechanisms were devised and offered with back-up to participants.

Go on; give it a whirl, George!

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Simon Taylor

Aug 21, 2012 at 15:39

Greater availability of high LTV mortgages will not help FTBs. It might help those who benefit from maintaining the house price bubble - HM Government, the UK banking sector, middle aged retirees who assumed that a highly illiquid asset was a sensible alternative to a pension - but heaping a load more debt onto the next generation won't help them.

What would help them is allowing the market to do it's work. House prices need to return to a level that relates sensibly to average incomes. FTB's cash deposits become larger (on a LTV basis) and so their borrowing becomes cheaper.

Government tinkering such as the criminal FirstBuy scheme only help the major housebuilders shift land for which they overpaid onto the taxpayer's book. FTB's should avoid them at all costs.

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Aug 21, 2012 at 15:43

John Lacy

If you do a bit of research you'll see that there is a shortage of housing in the UK. You can only fix that by building new houses or reducing the population.

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John Lacy

Aug 21, 2012 at 16:27

Jonathan---I have done my research and the most recent figures that I can find is that there were 720,000 empty houses in the UK as at the end of 2011.

Parliamentary figures for mid 2010 produced a figure of 784,000 empty homes. I'm not saying that these homes would cure the problem as they do not exist where there are abundant jobs. To a great extent the housing shortage is promoted by people who want to build on nice greenfield sites and don't want to look at bringing existing housing up to a habitable condition. The other factor of course is that the population of the over-crowded south east don't want to look at any other parts of the country because they can't over-charge for their labour costs elsewhere.

just think hoew much money in London allowances could be saved if you were to move government departments out of the south east. That would also drag ancilliary jobs after them

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Aug 21, 2012 at 16:48

John Lacy

The trouble with that theory is that it has been tried and failed. Great rafts of Wales and the North East have the Government as the dominant employer already BUT because of the National Agreements negotiated by Civil Service unions, the Government is also the best paying local employer in those areas which disadvantages other potential local employers who want to pay a more realistic wage. No private employer can afford to match Government perks or pensions.

The London allowance you refer to seems to have become an extra extra plus of course the annual BONUS element ( for turning up ? ) plus extra holiday , flexible working and subsidised most things ... so the chances of persuading

London Civil Servants to swap all that for a bit of country air seems unlikely

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Dislexic Landlord

Aug 21, 2012 at 17:14

House prices doubled over the past ten years

its normal to double of that period but we can not look back at what was normal in the past

Prices need to fall futher and I think they will we are nowhere near the end of the houseing market problems

I think it will take a futher 5years to return the mortgage market back to heathy

and i for one hope we dont go back to lending over 90% LTV if you cant save 10% you should not be buying a home I would change Morgage lending here is my thoughts

No More than 4 Times salary

Compusary Mortgage protection Ie Payment Protection and Lifecover combined

No more Veriable Mortgages everything fixed for the term of the Mortgage ie 25 years

10% min deposit

Capital and repayment

hopefully the above will stop Repos

The world has changed freinds we need to relise this and move on

and we need to get used to the fact that not all will be able to afford to buy a home of there own

My genaration have been lucky but the next genarations it will be a differant world

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John Lacy

Aug 21, 2012 at 17:30

Druceym---I agree with your analysis---from past history not a great success but at least it puts money and jobs in to those outlying areas that weren't there before.

I would dearly love our civil service friends to refuse tio move out of London---just think---when they don't follow the job they have to go and live in the real economy. Long hours, lower pay, no perks and no cushy pension to accrue further benefits---thats where the real benefit would be. They'd have to become creators of wealth instead of consumers---a whiff of unemployment for London and its surrounding areas might be beneficial in the long run as it would make them appreciate what the rest of the UK have had to live with for years and might just improve their understanding of the wider population.

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Aug 21, 2012 at 17:34

No-one's mentioned the pernicious effects on FTBs of the boom in Buy-to-Lets. This is a problem which has urgently to be addressed, whether by increased taxation to lower returns, rent controls, outright prohibition or some other means.

Dislexic, I always enjoy your posts but regret that you and your ilk are a big part of the problem.

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Keith Cobby

Aug 21, 2012 at 18:19

I agree that BTLs are a major part of the FTB problem. Interest should not be offset against rent for tax purposes.

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Dislexic Landlord

Aug 21, 2012 at 18:24

FAO Kenpen 2

You make a very intresing point Ken But I only make a liveing the best way I can

There are lots of wrongs in this life I dont like guns but lots of folks have them and they kill

we live in a very inperfect world and if ending BTL I for one would do someting else with my life and bussiness activitys

BTL will stay and do you now why its the only way we can house a lot of the population

In a very strange way BTL is like a lot of other areas in life in 2012

Privitisation British GAS, ELECTRIC ,BRITISH STEEL, BRITISH RAIL ,the list goes on and on BTL is no differant from investers in the privatisation of the UK

The country is broke we can not change a thing Mrs Thatcher started the who thig off selling Council Houses

If we stop BTL lets go back to the GPO ect ect

Before anyone points the finger at me ask DID YOU BENIFIT from privitiastion did you take a win fall from the demutaliastion of Building Sociertys


Its not Just BTL its the who area of bussiness we nowlive in which I think started long before BTL

Landlords have been with us sincethe start of time The Queen DUKE OF Westminster the list goes on

Its a strange country we live in when we blame working class landlords for all the problems

Look around you its a changed world

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Aug 21, 2012 at 18:27

The one thing that made renting so popular was the 6 month short hold tenancy agreement. Before that if you had a tenant it was almost impossible to get rid of them or increase rent. Now you just need a maximum of 6 months notice. If they want to make renting less popular they just need to revert to the old law.

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Dislexic Landlord

Aug 21, 2012 at 19:00

FAO Jonathan

I think we should all go back to the days when the govt owns everything

British Layland the Good old GPO ect ect

Just give this a thought Mortgage Express ( Bradford And Bingly ) Northen Rok they were lending to Landlords at a horrific rate and look whats happened to them

Do you really think that if they had not been demutalised that would be the caseand I would not think that member of building sociertys gave a dam as long as they got there £250

We need a rethink about it all not just assured shorthold tenanceys

I hope owners of Privitised stocks and shares give a thought to Old Age pensioners dieing in the winter because they cant aford to heat there houses

I dont think investers really care as long as there getting there dividends

There is a great deal wrong with the houseing world and the investment world so dont just blame BTL thats far to simple to put the world right

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Aug 21, 2012 at 19:13

Dislexic Landlord

Yes, I used to love getting a slice of tea on a British Rail train

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G Robinson

Aug 21, 2012 at 22:29

Interesting no-one here holds with the idea that encouraging FTB's gets the housing market moving. People moving house then spend on furniture, white goods etc. Just the boost that everyone says the economy needs.

With a house to sell and no buyers, I declare self interest in such a policy.

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Geoffrey Ashby

Aug 22, 2012 at 10:35

House prices are 40% or much more, too expensive compared with the average ability to buy on sensible multiples of Income - unless they somehow fall this inability to buy will persist. This is the `fault of all Parties because noone spoke out when Interewst only borrowing was taking place - it obviously drove prices upwards to a point where they are today. However, there is a` point which is completely overlooked: Estate Duty easement to trhe present combined 650,000 limit means most families in todays low interest return era are renting their houses out and adding to the shoretage of houses to buy plus Banlks would be well and truly bust if they too the knock rthey shouyld on loans to Builders and Buzers.

I am verz liquid at present and was going to buz a Houzse and rent out mz Flat but in London there is another problem for Flat and House owners + lack of qualitz of life because neiubours are renting and come and go resulting in lack of normal communitz life. What a mess + the Governme3nt obviouslz must be looking for inflation over several zears to sort things out + bit it wont happen. If zou want to sell a Flat in London at present it is onlz the Buz to Rent brigade who are in the Market.

Commentators would do more good repeating and repeating that Prices ąre still vastlz too high.

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Simon Taylor

Aug 22, 2012 at 12:31

G Robinson

Encouraging FTBs into the housing market wont stimulate the economy if it simply means conning them into unsustainable levels of debt via a Brownesque taxpayer guaranteed scheme such as FirstBuy.

Let the market do it's work. Let banks which make risky mortgages available go bust if their borrowers fail to pay them and remove taxpayer subsidies for those who borrow too much and expect state help.

And you'd probably find there are buyers for your house if you drop the price.

Good luck.....

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Aug 22, 2012 at 17:31

FAO John Lacy:

We're on the same page. And WHEN will some well-resourced institution commission an accurate TRUTHFUL analysis of PRIVATE v's PUBLIC sector

benefits. Not the worthy nurses and exploited footsoldiers in fire, police etc but the mid/senior management and mandarins whose current pension packages ( which are largely unfunded and come out of annual UK income ) will bankrupt the country in the next 10 years. Somehow we have to demonstrate to this underworked, overpaid morass of mediocrity that we have had enough ... sorry ... the red mist is rising ...

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alan franklin

Aug 26, 2012 at 09:01

As a landlord - and former tenant for 24 years - I have great sympathy for anyone with housing problems.

I grew up in a slum, far worse than anything people live in today: no heating, no bathroom, no kitchen, toilet across the yard and one amenity- a cold tap over a cracked sink.

Grandma, who raised me, cooked in a foul little hole called a scullery, on a clapped out gas cooker.

We disliked the landlord who was called a "bodger." Holes in the floor were fixed by beating out biscuit tins and nailing them down over the hole.

Later on, when I started to learn economics, I realised that the cause of our misfortune was Socialism. Rent controls were bad for landlords and terrible for tenants. Litle money came in and not much was spent. Result: all round misery. When you try and do good by controlling things it always backfires. Please re-read that, all Socialist do-gooders.

Eventually I became a journalist, then a chief reporter running a busy newsdesk, then an editor, then a publisher. I freelanced for all the dailies, radio and TV and covered thousands of stories. The number one problem in housing came from - council estates!

Social housing does not work. Furthermore, it removes all initiative and incentive from people to improve their property. I could list thousands of complaints from council tenants in many areas and counties. Work was seldom done properly or on time. Complaints were endless, problems too numerous to list. Over many of the former council estates hung an air of despair.

This changed when Margaret Thatcher unleashed enterprise and initiative and gave those trapped in councildom the keys to the cell door. A brilliant and hugely successful idea. Go through former estates now and see all the improvements, the different colour schemes, the additions. People became kings of their castles and loved it.

Any time you have huge organisations running housing you get poor admin and worse housing- I could tell story after story of really bad overspill housing. This cost hundreds of millions of taxpayer money to put right and the places are still not pleasant to live in.

Giving private landlords some freedom to invest their hard-earned money in property provided a great pool of decent modern housing for those who could not immediately- or chose not to - buy a home. The idea that landlords make a fortune is another joke.

If you maintain properties to a high standard, redecorate every couple of years, provide new appliances, pay fees of all kinds for everything from gas inspections to ground rents, you will make around three per cent net. I speak with 40 plus years of experience in property, going back before shorthold tenancies, when we had to provide bed and breakfast for tenants!

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Dislexic Landlord

Aug 26, 2012 at 09:28

FAO Alan Franklin

I do agree with every thing you have said

Councils run houseing badly just look at the amount of houseing stock that has been demolished

in Newcasle high rise flats are being demolished I think there are 90 flats in each block and five are being demolished as I write this

WE have estates that are slum estates if you care to drive through the slum estates at about 08..30 in the morning in the winter there is not a light on in some streets NO BODY IS GOING TO WORK

I totaly agree with your comments about repairs I have a scedule of works going on at this time

Its a great way to show good tenants that you care about them and it builds on good customer relations too

just one other thought have any readers ever thought about the amount of money that subsides council and Houseing Assocation Tenants get every month

it must amount to millions

ask yourself the question readers do you get a tax brack for liveing in the house you own or rent

I bet you dont remmember MIRAS long gone now and that was the only tax breack the avarage hard working tax payer ever got

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Aug 26, 2012 at 09:30

All this is good news for landlord: Whereas the ganks on government advice, will tell you the you can afford £500 in mortgage repayments, they won't accept that you are paying £800 in rent, and cna by definitiona afford £800. - Net result, first time buyers frozen out, rents go up

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jimmy via mobile

Aug 26, 2012 at 09:41

Labour twisted all policies to buy votes. House prices boosted 200% in 10 years. All agree the UK needs 1m more homes, (150,000 built each year, some 100,00 too few), due to the open door policy 3.5m more people need homes, at 3.5 per house that is the extra demand.

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