First-time buyers suffer big loss

by John Fitzsimons on 13 October 2009  |  1 comment
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Britannia Building Society has swept the rug out from under the feet of first-time buyers by withdrawing its 90% loan-to-value mortgages.

Things were starting to look so much better for first-time buyers. Lenders were starting, ever so slowly, to loosen up, and offer some decent products to those with smaller deposits. Even HSBC has vowed to offer a further £500m to borrowers with just a 10% deposit for the rest of the year.

But now those borrowers have suffered a body blow, after Britannia Building Society pulled its entire range of 90% loan-to-value mortgages.

The mutual has been a major player in the 90% market for a while, lending in the region of one in every ten 90% mortgages - estimated to be in the range of £300m since June, when the 90% deals were reintroduced.

That's a massive hole that will need filling, if first-time buyers are to retrieve their position as a vital cog in the British housing market. Without first-time buyers, eventually the whole thing grinds to a complete halt.

The fear is that as Britannia is no longer in the market, those borrowers who would have gone for one of their deals will turn instead to the lenders who do still offer reasonably competitive deals, and those lenders will be swamped.

For example, the market-leading mortgages at 90% loan-to-value are on offer from two members of the Royal Bank of Scotland Group - RBS itself, and NatWest. Okay, RBS has been propped up by the taxpayer, but it's not like they have a limitless fund at their disposal.

If they get too many applications, they will have to reprice their deals to a more expensive level, or in the worst case scenario, withdraw altogether. This will be a disaster, as this area of the market needs more lenders, not fewer.

Unfortunately, unless more lenders do take the plunge and enter the 90% market, prospective borrowers will be stuck saving that bit longer to have at least a 15% deposit.