Britannia deals blow to first-time housebuyers
First-time buyers with a small deposit have been left with even less choice after one of the biggest mortgage lenders in the market pulled its deals last night.
Britannia, which merged with Co-operative Bank in August, will no longer offer home loans to borrowers with a 10 per cent deposit, the mortgages popular among first-time buyers.
The move leaves only a handful of lenders still willing to offer loans to buyers with small deposits.
The cost to lenders of borrowing on wholesale money markets to fund new mortgages has fallen considerably in recent months and is now beginning to stabilise, according to experts. Swap rates, the money markets used to fund fixed-rate mortgages, are at a record low. However, mortgage brokers have lamented the failure of banks to reduce rates for struggling first-time buyers. It is feared that less competition could push up the cost of deals for first-time buyers even farther.
Over the past three months Britannia has offered one out of every ten mortgages requiring a 10 per cent deposit, lending £300 million to almost a thousand first-time buyers.
Where deals are available they are much more costly. The average fixed-rate deal for buyers with only a 10 per cent deposit has a rate of 6.63 per cent, compared with 5.08 per cent for borrowers with a 40 per cent deposit, according to figures from Moneyfacts.co.uk, the financial website.
Even though swap rates have fallen, the availability of mortgages remains restricted as lenders struggle to secure funding from wholesale markets and retail deposits. Banks and building societies are expected to approve £145 billion gross of new loans this year, compared to £363 billion in 2007.
Britain’s biggest mortgage lenders, including the taxpayer-controlled Lloyds Banking Group and Abbey, passed on a series of interest rate cuts this week, but only on deals for cash-rich borrowers. Northern Rock, the Government-owned lender, reduced a number of deals by up to 0.3 percentage points for borrowers with at least a 15 per cent deposit.
Meanwhile, Woolwich, the mortgage arm of Barclays, lowered the cost of its lifetime tracker deal by almost half a point to 2.79 per cent, or 2.29 per cent over the Bank base rate of 0.5 per cent. The deal requires a deposit of 30 per cent and has a £999 fee.
Mortgage brokers welcomed the series of rate cuts announced this week.
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