It’s an autumn mortgage bonanza

It’s an autumn mortgage bonanza

If you have a 10 per cent deposit or equity in your home, banks will fight for your business

Carol Lewis

September 14 2019, 12:01am, The Times

Homeowners and would-be buyers have a phenomenal choice of cheap mortgages after a flurry of new deals.

The number of loans available to those with a deposit, or equity, of 10 per cent or more has been boosted by the unprecedented arrival of 65 products in the past month.

Unfortunately, those struggling to get on to the ladder are missing out on the bonanza, after 11 products requiring only a 5 per cent deposit were withdrawn. With more than £26 billion worth of mortgage deals due to mature next month, lenders are competing hard for remortgage customers. According to Moneyfacts, a financial data analyst, most of the deals are for those with deposits or equity of between 20 and 25 per cent.

The new products have lowered the average rates available on five-year fixed-rate mortgages — the most popular loan on the market. The 80 per cent loan-to-value (LTV) mortgages had the largest drop in interest rates with the average falling from 2.87 per cent in August to 2.77 per cent this month. The average two-year fixed rate is 2.45 per cent compared with 2.51 per cent a year ago.

This average, however, disguises just how cheap some deals are getting. The best two-year fixed rate is from HSBC at 1.24 per cent, 60 per cent LTV, with a £999 fee. Darren Cook, a finance expert at Moneyfacts, says: “It seems that lenders have taken heed of the Prudential Regulation Authority’s warning about reducing rates on riskier, higher loan-to-value mortgages. As a result, the number of mortgages available at 95 per cent loan-to-value has fallen from 391 to 380 over the past month and the average five-year fixed rate at 95 per cent loan-to-value has increased by 0.01 per cent.

“Borrowers with a 5 per cent deposit may benefit from waiting until they accumulate a 10 per cent deposit to secure a more favourable rate and have a greater choice of products. There is double the number of mortgages at 90 per cent loan-to-value compared with the 95 per cent,” he says.

Chris Sykes of Private Finance, a mortgage broker, says that it isn’t only off-the-peg mortgages that are having a bumper season. “Many mainstream lenders are coming out with bespoke mortgage ranges that offer a far greater degree of criteria flexibility. HSBC, Natwest, Skipton, Bank of Ireland, Santander, Halifax and other mainstream lenders are hoping to attract the high-net-worth clients that would previously have been ineligible with them.”

This should make deals easier for the self-employed, small business owners and those paid primarily in bonuses, who have found it hard to get loans since stricter lending criteria were brought in under the Mortgage Market Review. The review, instigated in the wake of the financial crash and put into action in 2014, made banks much more cautious about lending.

Bespoke lending can offer greater flexibility on affordability criteria, for instance, taking account of bonus payments or fixed-rate terms for periods other than the usual two or five years. Some, such as Clydesdale, have loans designed for particular professions.

Despite the fall in the number of 95 per cent LTV products, first-time buyers are still the largest property buying group and a key target for lenders. Halifax launched a 100 per cent mortgage for them this week — with the catch that they will need to persuade mum and dad to lock away some savings as security.

The Family Boost mortgage is fixed at 2.9 per cent for three years up to a maximum loan of £500,000 and 10 per cent of the purchase price is deposited as savings, which attract a respectable 2.5 per cent interest. Either the borrower or family member must have a Halifax reward or ultimate reward current account.

Russell Galley, a managing director at Halifax, says: “As part of our commitment to lending £30 billion to first-time buyers by 2020, we are offering families a way to help give the next generation the boost that they need to get on to the property ladder, while providing competitive rates to buyer and supporter.”

According to Halifax, the average deposit for those buying their first home is £41,099, 52 per cent higher than it was in 2009, at £27,059.

There is good news too for those contemplating retirement. Hodge Lifetime, a subsidiary of Hodge Bank, launched a fixed-for-life retirement interest-only mortgage for people aged 50 or over. The loan is repayed when you, or your relatives, sell your house. The bank offers a fee-free version at 4.55 per cent and one with an arrangement fee of £995 at 4.35 per cent at 70 per cent LTV.