More low-deposit mortgages offered


Embargoed to 0001 Thursday March 6File photo dates 09/08/13 of Estate Agent's boards as the Government has failed to demonstrate whether its �3.7 billion Help To Buy equity loan mortgage scheme is giving value for money, the spending watchdog has warned. PRESS ASSOCIATION Photo. Issue date: Thursday March 6, 2014. The scheme was launched in England last April with the aim of offering credit-worthy buyers with a deposit of at least 5% a helping hand onto the property ladder as well as increasing the housing supply by being targeted at new-build properties only. But the National Audit Office (NAO) found there is no method in place to measure what the

Mortgage providers have become "significantly" more willing to lend to people with deposits of less than 10% this year as the Government's flagship Help to Buy scheme continues to have an impact, a Bank of England report has found.

The Bank's credit conditions survey for the first quarter of 2014 found the willingness to lend at loan-to-value (LTV) ratios above 90% is the highest reported since the question first started to be regularly asked of lenders last spring.

Many lenders attributed this increased availability of low-deposit mortgages to their participation in Help to Buy, the report said.

The UK-wide Help to Buy mortgage guarantee scheme was fully fired into action last October to offer state-backed mortgages to credit-worthy people with deposits as low as 5%. Lenders representing around two-thirds of the mortgage market have come on board the scheme.

The survey asks banks and building societies about credit conditions over the past three months and their expectations for the coming quarter to help maintain financial stability.

Lenders said they expect demand for mortgages from home buyers to see a significant lift in the next three months. They also told the survey they expect rising house prices to encourage more people to re-mortgage.

Mortgage borrowers have been taking advantage of ultra-cheap deals in the low interest rate environment as housing market activity has lifted, and lenders told the survey they expect to narrow their profit margins slightly in the coming months. But some lenders indicated that the scope for
further falls could be limited.

Meanwhile, the survey also boosted hopes that business investment is poised to rise as the economy recovers.

There was a slight pick-up in loan availability for small businesses, the survey found. A higher proportion of loan applications from small businesses were accepted in the first quarter of the year, continuing a positive trend seen in the recent quarterly surveys.

Demand for lending from medium-sized businesses and large corporates was reported to have seen a significant increase, with lenders needing the loans to fund mergers and acquisitions and capital investment.

Lenders said that "strong competitive pressure" has prompted them to narrow their profit margins when it comes to lending to larger corporates.

The report said that further expansion of credit availability to the corporate sector is expected in the coming three months.

Commenting on the report, Mark Harris, chief executive of mortgage broker SPF Private Clients, said:
"As there is a limit to the number of people with 40% deposits and squeaky-clean credit histories, lenders will have to be prepared to go up the loan-to-value curve and consider the odd blip on the credit file, such as missed mobile payment several months ago, if they are serious about improving their market share.

"This is good news for borrowers who have more modest deposits, with the Bank of England reporting that availability of higher LTV mortgages has already significantly increased.

"The introduction of Help to Buy has played a large part in this, with lenders operating outside the scheme also raising their maximum LTVs in order to attract borrowers."

Richard Woolhouse, chief economist for the British Bankers' Association (BBA), said: "Today's credit conditions survey shows demand for lending by businesses of all size is growing and the cost of borrowing remains low.

"With rates competitive and nearly seven out 10 applications for bank finance approved, there has rarely been a better time for companies to apply for credit.

"An interesting part of today's release is the strong pick-up in demand for mergers and acquisitions lending.

"Businesses are priming themselves to either acquire other companies or invest in new equipment or staff. This is good news and suggests the recovery is broadening out."

The people who affect house prices

The people who affect house prices