Mortgage News

First time buyers are being further squeezed out of the mortgage
market with one of the UK’s biggest lenders pulling its 10% deposit
products.

Britannia, which merged with Co-operative Bank earlier this year,
said it will no longer offer mortgages to borrowers with a 10% deposit.

The news further diminishes the tiny number of lenders willing to offer loans to buyers with small deposits.

Over the past three months, Britannia has issued one in ten of all new 10% deposit mortgages.

Mortgage brokers fear the lack of competition among providers
willing to lend to first-time buyers could push interest rates up even
further.

Britannia’s announcement comes despite a significant reduction in the cost to lenders of borrowing on wholesale money markets.

Abbey Mortgages is advising potential first-time buyers who are
currently renting to take their first step onto the property ladder.

The bank’s research shows that first-time buyers could collectively
save up to a massive £1 billion if they acted now and bought their own
home.

According to Abbey, 1.61 million Britons said they were looking to
buy in areas of the country (other than London) and based on current
prices, these people would save £624 each over the next year.

Commenting on the figures, Nici Audhlam-Gardiner, director of Abbey
Mortgages, claims: “Our latest research shows there is hope for
first-time buyers trying to buy their first home. It’s now cheaper in
all bar one of the regions (London) to buy rather than rent and shows
that saving for that all important deposit is so worthwhile too.”

However, the latest figures from the Council of Mortgage Lenders
show that first-time buyers still require a hefty deposit of at least
25% in order to secure a mortgage.

But Ms Audhlam-Gardiner said Abbey is committed to helping this
group of people with its new Homebuyer Plus range of mortgages, which
include special benefits for potential homebuyers such as helping with
legal and valuation fees.

The range includes a 3.29% two year tracker at 75% LTV, a 3.99% two
year fixed-rate at 70% LTV, a 5.79% two year fixed-rate at 80% LTV and
a 5.99% three year fixed-rate at 85% LTV.

Nationwide has launched a number of initiatives aimed at helping first-time buyers and homemovers.

For first-time buyers, the building society is discounting its
reservation fee by up to £500 and offering a £250 reservation fee
discount, plus free legals.

The lender is also extending this offer to its four and five-year fixed rate deals.

The move cuts the reservation fee on a three-year fix at 4.44% and 60% loan-to-value ratio to just £396.

Homemovers can benefit from a combined reservation and free legals
option, which reduces up-front costs on the society’s fixed and tracker
rate loans.

In addition, products available to existing customers coming to the
end of their deals have been enhanced with fee and rate cuts.

In related news, Nationwide recently announced that it is proposing
to raise cash to finance its mortgage lending through a sale of UK
residential mortgage-backed securities (RMBS).

Bad debt resulting from investments in mortgage-backed securities
has been at the heart of the credit crisis and the news is being seen
as evidence that the RMBS market may now be in recovery, particularly
as Lloyds Banking Group made a similar move last month, with its first
issue of mortgage-backed bonds in over a year.

The Council of Mortgage Lenders (CML) has reported that gross
mortgage lending totalled an estimated £12.5 billion in September,
nudging up 2% from £12.3 billion in August.

The figure is still 27% down on a year earlier but puts gross
lending in the third quarter of 2009 at around £38.9 billion, an 18%
rise on the previous three months.

The latest quarterly figure is, however, down 36% on the same period of 2008.

The Council attributes the “modest improvement” and “relative
stability” of the UK housing market in recent months to a rise in house
purchase activity.

However, in terms of mortgage lending, this has been off-set by a
decline in remortgaging as borrowers coming off fixed rates opt to
remain on their existing lenders’ standard variable rates.

CML economist, Paul Samter, observes that while house buying
activity has improved since the beginning of the year, it remains weak
on any historic comparison”.

He is therefore predicting that it is unlikely to rise much further
“given the constraints the lending community faces and a still
difficult economic backdrop”.

However, Mr Samter acknowledges some positive signs that the
wholesale markets, which finance the mortgage businesses of banks and
building societies, have begun to thaw.

Investors are once more showing interest in residential
mortgage-backed securities (RMBS), which have been blamed for much of
the bad debt that sparked the credit crisis.

Nationwide has recently announced plans to raise cash through an
issue of RMBSs, following on from Lloyds Banking Group which last month
placed its first issue of mortgage-backed bonds in over a year.