The Co-Operative Bank has just cut the mortgage rate on their 10% deposit mortgage from 4.84% to 3.99%, which means that many first time buyers will have an excellent boost to help them onto the property ladder with significantly lower monthly payments, guaranteed up until December 2014.
The move has been attributed to the government’s new Funding for Lending scheme, which is designed to get banks pumping out money into loans for houses, thus stimulating the housing market and, through that, construction and other industries. The hope is that this will result in the economy receiving a kickstart which drives up economic growth whilst also helping those who have been hit worst by rocketing house prices over the last two decades.
The account is already a good deal, but what makes it even more attractive is the fact that the bank charges no fees on this mortgage, whereas other provides will expect borrowers to hand over as much as £1,250 or more just to take out the mortgage in the first place. This is another significant boost for plenty of buyers, allowing them to put an extra £1,000 or so onto their deposit.
This is also the first big cut on a mortgage designed for first time buyers, as most other rate reductions have come on mortgages that required far higher deposits, making them only appropriate for those who already had property to sell. The news has been welcomed by many people who had seen this as a real problem with the results of the Funding for Lending scheme so far.
John Sexton, for instance, a mortgage expert from finance-advice website Moneynet.co.uk, pointed out how this marked a necessary and positive move away from the previous effects of the deal: “The market has been awash with rate cuts and super low cost new deals for those fortunate enough to have a 40 per cent-plus equity stake in their property, and until now lenders have decided to play it safe with the lower risk element of the market. The focus needs to shift away from the saturated 60% LTV ‘lending safe haven’ to delivering real and affordable home loan options to those who really need it.”
Of course, the real challenge for the scheme is to make this a consistent achievement while Funding for Lending lasts, as it could just be a single anomaly at the moment.