First time mortgage borrowers being ignored by lenders

Mortgage lenders remain concerned about risk and are fighting shy of those looking for a mortgage with anything less than a 25% deposit.

As Michelle Slade of Moneyfacts.co.uk comments ‘Two years ago, rate-driven competition led to 90% LTV deals being some of the most attractive rates on the market.

Today, a 25% deposit remains the level where most lenders are willing to do business. Anything smaller than this and borrowers will pay a hefty price.’

Mortgage lenders remain quite risk averse and are looking to take on borrowers who present with minimal risk. As a consequence first time mortgage borrowers are being ignored.

They are pricing mortgages with a higher LTV at a significant margin over the cost of funding to cover for this risk but again as Michelle comments ‘A higher margin for risk is expected on a 90% LTV deal, but a 4.25% margin over the cost of funding seems excessive and difficult to justify.’

HSBC recently announced its 1.99% discounted mortgage which has created huge interest. Whilst this is headline grabbing, no doubt to qualify for this great rate you must have a squeaky clean credit history – and just how many have that?