UK Mortgage Rates Decline but Borrowers Still Cannot Afford Mortgages

Latest overview of the British mortgage market showed that despite the decreasing interest rates, many borrowers are still unable to afford a mortgage loan. The point is that the majority of UK lenders are introducing new criteria along with decreasing rates. For instance, the record-low mortgage deal, recently launched by the HSBC bank, which is being offered at a mere 1.99%, is only available for those borrowers who have a min. of 40% deposit, which, on average equals to £80,000. Of course, the deal might seem attractive to Brits moving homes or remortgaging, however, it leaves out first-time buyers, who evidently cannot provide the bank with a 40% deposit. Another catch of the record-low rate is that it is not a tracker; rather, the rate is 1.95% discount from HSBC’s SVR of 3.94%. This fact, of course, suggests that the rate is not fixed and might not move along with the Bank’s rate later. Also, the deal comes at a rather high fee of £1,199 and is only available for loans that do not exceed £500,000. It should be noted, however, that HSBC still offers good deals for buyers with smaller deposits (relatively low rates are available for borrowers with a 25% deposit) and for buyers who need large loans (still, the latter need to have taken other HSBC products to qualify). Another seemingly attractive deal is available at the Royal Bank of Canada. This private bank offers mortgage deals at as low as 1.53% (1% above the monthly Libor). The catch is that it is only available to bank’s customers who have deposited a min. of £1 million with the Royal Bank of Canada; moreover, the deal can only be accessed through mortgage brokers. Some other British lenders, including Abbey, NatWest, First Direct, Alliance & Leicester, etc. have launched a number of good deals for borrowers switching accounts. Borrowers buying an expensive property and, thus, needing large mortgage loans, are better off applying to private banks such as Coutts (part of the Royal Bank of Scotland), HSBC Private Bank or Kleinwort Benson. All these lenders can provide their borrowers with mortgages of up to £2 million on special terms.