Alliance & Leicester has become the latest bank to levy higher rates on customers with small deposits, a move which will invariably hit first time buyers (FTB) the hardest.
A new mortgage customer with a 10% deposit will now have to pay a 0.5% higher rate on a two year fixed rate deal at A&L than someone with a 25% deposit. On a £150,000 loan, that equates to additional repayments of £524 a year.
Both Nationwide and Halifax announced similar moves earlier this year, as jittery lenders look to turn away all but the lowest risk customers in the wake of the credit crunch.
Bad news for all new customers
A&L has also raised the cost of its entire mortgage product range to new customers by between 0.2% and 0.9%, which will place a massive strain on household’s budgets.
It wasn’t the only bank with bad news for first time buyers, however. From today onwards, Halifax says it will no longer offer any mortgages to borrowers with small deposits who do not use a broker, unless they open a current account with them.
And as a final piece of bad news for the beleaguered FTB, Woolwich has pulled all 95% LTV products from the market, meaning borrowers will have to come up with a deposit of at least 10% to qualify for any of its deals.
Lenders won’t cut FTBs any slack
With lenders demanding ever larger deposits and penalising those who can’t meet those requirements, it’s hardly surprising FTBs are finding it harder than ever to get on the property ladder.
Mortgage broker Charcol says they made up only 4% of its mortgage deals in April, compared to 7% in March and an average of 10% last year. With mortgage deals becoming ever more restrictive, those numbers are unlikely to rise any time soon.
There was at least some good news for those able to afford a house. According to brokers Firstrung, FTBs are the least likely buyer group to have their home repossessed.
