Yorkshire Building Society has launched a new 95 per cent mortgage independently of Help to Buy, undercutting competitors who signed up to the government scheme as rates for first-time buyers become increasingly competitive.
The mortgages, available for first-time buyers and home movers from Wednesday onwards, will charge initial interest rates from 4.59 per cent for a two-year fixed-rate deal. This compares favourably with a two-year fixed-rate of 5.19 per cent for Halifax’s 95 per cent mortgage, and 4.99 per cent for NatWest’s equivalent.
Overall, rates range from 4.59 to 5.49 per cent for a variety of two- and five-year deals through Yorkshire and its associated brands, which include Chelsea, Barnsley, Norwich & Peterborough and intermediary-only operation Accord. Fees range from zero to £1,545.
The lender said that although it “supports the aims of Help to Buy in increasing the availability of low deposit mortgages”, it is “in a position to offer home loans at 95 per cent loan to value without requiring government support”.
“Our research with customers shows they want simple products to meet their needs and traditional mortgage lending achieves that without having to rely on a mortgage guarantee,” the company said.
The second half of Help to Buy, which launched in October, guarantees the lender 15 per cent of any loan made as part of a 95 per cent mortgage. For such a guarantee, the lender must pay the government a fee amounting to 0.9 per cent of the loan value. However, this guarantee only lasts for seven years – far shorter than the typical duration of 95 per cent mortgages.
There are 33 other lenders offering 95 per cent mortgages– the most since 2006. Many of them are smaller, regional lenders, such as Hanley, Monmouthshire and Penrith. Like Yorkshire Building Society, they have opted to deal with the risk of high loan-to-value mortgages themselves, rather than take advantage of the Help to Buy guarantee.
They may include caveats such as a low maximum amount for the loan, or a requirement that the residential property is within a given geographical area.
The Yorkshire mortgages are more like those offered by Help to Buy lenders such as Halifax and NatWest, although the maximum loan amount of £500,000 falls short of Help to Buy’s £600,000.
Nationwide, the UK’s largest building society, said last week that its lending volumes at higher multiples of loan-to-value had doubled in the first half, compared to the same period last year.
Aaron Strutt, a mortgage broker at the Trinity Financial Group, said that the new mortgage represents “great news for first time buyers”.
“They [Yorkshire Building Society] have obviously been biding their time – they’ve been waiting until a few more of the lenders come back in,” he said. “They’ve undercut the whole of the Help to Buy scheme”.
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