UK Mortgage Lenders Become More Tolerant Towards Low Deposits

The latest overview of the British mortgage market revealed that most UK banks and building societies are starting to offer new deals for mortgage borrowers with low deposits. However, the increasing number of high loan-to-value mortgages does not mean that borrowers are getting decreased interest rates. With the beginning of the economic downturn, mortgages offered at a loan-to-value ratio of more than 60% almost disappeared; they, however, have been reintroduced on the market by lenders in the recent months. According to estimates, the number of mortgages offered for borrowers with 15% deposits, skyrocketed by 62% since March 2009; now there are more than 230 mortgage deals for “cash-poor” borrowers, yet, an average interest rate on a 2-year fix remained at a high of 5.06% since July 2009. This mortgage market overview, carried out by a financial online source Moneyfacts, followed a report by the Bank of England. On Thursday, November 5th, the Central Bank announced that the base rate, which currently stands at the level of 0.5%, will remained unchanged. Mortgage brokers, such as Mr. David Hollingworth and Mr. Ray Boulger, are determined that the news will have little or no impact on mortgage interest rates across the UK. Mr. Hollingworth believes that mortgage interest rates mainly depend on the level of competition on the market and, as all lenders seem to be reluctant to lend in current market environment, there are no conditions for healthy competition. Mr. Boulger, however, cited Northern Rock as an example of a lender that made significant cuts to its mortgage rates and, thus, made a huge shift to reach its lending target. He expects other lenders to follow the suit, yet other mortgage brokers are not so optimistic.