United Kingdom

First-time buyer mortgages are back: Banks launch a host of new deals

First-time buyers have been offered a glimmer of hope as banks launch a host of new deals and cash incentives.

For months, it has been nearly impossible for homebuyers with small deposits of 5 and 10 per cent to find a mortgage.

But TSB and digital bank Atom have joined Yorkshire Building Society to launch a range of loans for borrowers with a 10 per cent deposit, while Virgin Money cut its rates.

New deals: For months, it has been nearly impossible for homebuyers with small deposits of 5 and 10 per cent to find a mortgage

Nationwide and Platform, owned by Co-op Bank, announced plans to scrap restrictions on gifted deposits.

However, rates have rocketed. The average two-year fixed rate for a 90 per cent mortgage has jumped from 2.05 per cent in January to 3.55 per cent in October, according to Bank of England figures.

Accord, owned by Yorkshire BS, charges 3.69 per cent for a two-year fix, and 3.79 per cent for a five-year deal - with a £995 fee.

TSB and Platform are also offering five-year deals at 3.79 per cent. TSB has a £995 fee and offers £500 cashback. 

Platform’s deal is fee-free and has a £1,000 cash incentive. Atom charges 3.81 per cent on a five-year deal with no fee and £500 cashback.

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Chris Sykes, of mortgage broker Private Finance, says the return to low-deposit lending shows banks believe the housing market has almost weathered the Covid storm.

But Simon Cutler, director of independent financial adviser Blackdown Financial, says it’s ‘more like a temporary change of mood to entice new borrowers for a short time’.

Meanwhile, self-employed borrowers are facing a clampdown because banks and building societies are nervous about them not having a guaranteed income.

Last week TSB restricted lending to the self-employed with at least a 25 per cent deposit. 

Homebuyers can also only borrow 4.25 times their earnings compared with 4.49 for those who are employed.

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