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Mortgage News HSBC To Make £350 Million Available For First Time Buyer Mortgages 18471727

HSBC to make £350 million available for first time buyer mortgages
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HSBC to make £350 million available for first time buyer mortgages

14 October 2011 / by Colm Hebblethwaite

There has been a longstanding war of words between the UK’s financial institutions and various government ministers over the amount of money that is being set aside for first time buyer mortgages and small businesses. The banks have consistently claimed that lending figures show they have a determination to lend while ministers have demanded further action.

Increased Mortgage Lending

HSBC, which claims to have provided a mortgage to one in eight first time buyers this year and increased its mortgage lending by 70% since 2007, has announced that more loans will be available to those seeking to get on the property ladder.

The company will be making a further £350 million attainable to those consumers who are able to put down a deposit, or have equity equating to, 15% or less. At least £250 million of this amount will be specifically earmarked for first time buyers who are looking for mortgages with a loan to value of 90%.

It may at first seem like the UK housing is in a depressed position, and that demand for new mortgages is currently at very low levels.  Figures from the Council of Mortgage Lenders show that the last three years have seen annual applications for first time buyer mortgages drop to 200,000 form 500,000 in the preceding years.

Competitive Mortgage Rates for Smaller Deposits

 HSBC points to its own Research Opinion Survey carried out in March that found that 78% of respondents who were non-homeowners aspired to get a foot on the property ladder.
The company is also offering customers more competitive rates with small deposits. The announcement of additional funds for lending coincided with the company’s launch of a new set of LTV rates, and the further commitment to charge no fees for all 85% and 90% LTV rates.

A run through of the new first time buyer mortgage rates for those who are able to put down a 10% deposit are:

–    An above base rate lifetime tracker rate of 4.09%
–    A two year fixed rate of 4.49%
–    A five year fixed of 4.89%

The new rates for those willing to put down a 15% deposit are:

–   An above base rate lifetime tracker rate of 3.49%
–    A two year fixed of 4.29%
–    A five year fixed of 4.69%

Commitment to First Time buyers

Peter Dockar, who is head of mortgages at HSBC, has publically stated that the company sees these competitive rates as a key part of its strategy of expanding the amount it lends to first time buyers.
He added that; “the announcement of fee free rates and a pledge to make a further £250 million available to first time buyers in 2011 shows HSBCs commitment to continuing to help people get on the housing ladder.”

First Time Buyer – Mortgage Deal Selection
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Representative Example:

A repayment mortgage of £120,000 payable over 28 years and 1 month initially on a fixed rate for 2 years at 1.99% and then on the lender current variable rate of 3.69% (variable) for the remaining 26 years and 1 month would require 24 monthly payments of £465.20 and 312 monthly payments of £565.39 and one final payment of £565.19.

The total amount payable would be £189,357.67 made up of the loan amount plus interest (£68,161.67), booking fee (£999), completion fee (£30) and valuation fee (£197).

In this example the overall cost for comparison is 3.7% APRC representative.