Mortgage lenders attempt to cut costs

June 3, 2009

There has been evidence that competition in the mortgage market is hotting up again, with lenders striving to increase their share in the mortgage market by trying to cut costs for potential buyers.

Many lenders are now competing to try and win a greater number of first time buyers, and have realised that in the current climate the best way to do this is to cut costs wherever possible so that affordability is increased for the buyers in question.

One lender, Halifax, has announced recently that it will pay the stamp duty for first time buyers that go with the lender, having already offered to pay part of their council tax. Abbey, another major lender, has decided to cut the interest rate on mortgages for those with smaller deposits, which usually includes first time buyers who have no previous home from which to take equity to put down by way of a deposit.

Another lender, Co-op, has said that first time buyers will be able to use the income of a close relative in order to guarantee their repayments. HSBC, one of the first to join in the battle to win first time buyers, has slashed its interest rates for those with smaller deposits. However, not everyone is impressed with the various changes that these mortgage providers have been making.

One industry expert said: ‘What first-time buyers need is better choice and better rates on loans for those with just small deposits. Incentives are fine, but you have to work out what they are really worth.’

This comes after banks refused to lower rates for those with smaller deposits, and at a time when many first time buyers have been struggling to get finance from banks, who have been putting more stringent lending regulations into place.

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