MILLIONS of first-time buyers could be excluded from the housing ladder from next week when Britain's biggest mortgage lender puts up its rates for customers who cannot afford large deposits.
Halifax Bank of Scotland (HBOS) says it is targeting "prudent" customers, raising the minimum deposit required from 3 per cent to 5 per cent and offering its best rate only to those who can put down a 25 per cent payment.
The move comes at the end
of a turbulent week for the mortgage market and sees the building society follow the trend set by other major lenders of "cherrypicking" the best customers since the credit crunch began. HBOS declined to say how much rates would rise, but a spokesman said: "There is some pricing upwards but it's very much in line with the market."
HBOS said that it was "rewarding" the 70 per cent of its new customers who put down a deposit of more than 25 per cent.
Deals for those people will be charged at a rate a tenth of a percentage point cheaper than they would have otherwise, the lender said. But the highest loan-to-value (LTV) offer will be 95 per cent from Monday, compared with the current cap of 97 per cent.
The change, which includes Bank of Scotland and Intelligent Finance mortgages, follows a similar move by Nationwide under which customers need at least a 25 per cent deposit to qualify for its best rates.
The increase paid by borrowers with less than a 10 per cent deposit have typically added more than £500 a year to a £200,000 home loan.
Commenting on the HBOS mortgage changes, Denise Blake, senior mortgage analyst at Moneyfacts.co.uk, said: "This move reflects the changes that we have seen over the last couple of weeks. Lenders have to balance out the risk they are taking on, so it's no surprise that Halifax are looking to attract the low-risk borrowers.
"Increased rates on high loan to values spells bad news for first-time buyers and remortgagers with little deposit. Anyone looking for a high loan to value is going to have a much harder time than they did six months ago.
"Despite these moves HBOS continues to offer competitive mortgages, especially for those with a larger deposit. Anyone interested must act fast."
HBOS said it was launching seven or eight new deals aimed directly at first- time buyers, including one five-year fixed-rate deal with a "competitive" interest rate of 5.69 per cent for loans of up to 90 per cent of a property value.
Earlier this week, First Direct withdrew its entire mortgage range from new customers after receiving five times its normal level of business.
The full article contains 465 words and appears in The Scotsman newspaper.
