Blink and you’ll miss it. For one day only, TSB is offering a new mortgage deal to first-time buyers, in the latest sign of the tight borrowing constraints facing those with small housing deposits.
The deal is a five-year fixed rate mortgage for first-time buyers who have a deposit of between 10 and 15 per cent — a segment of the market from which many lenders have withdrawn in recent months.
So few mortgage products are available at loan-to-value ratios of 90 per cent that lenders have been forced to offer time-limited deals to stem the volume of business they attract. Too much high-LTV lending threatens the balance of risk in their mortgage book.
TSB’s offer, available only via mortgage brokers on Friday from 8am to 5.30pm, excludes those looking to buy a flat or seeking to borrow more than £350,000. With a maximum term of 30 years, the loan has an interest rate of 3.24 per cent with a fee of £995 or a fee-free rate of 3.49 per cent.
Ian Ramsden, director of borrowing at TSB, said: “We want to support the demand from our customers as much as possible, particularly first-time buyers. This temporary reintroduction will allow us to manage our service levels as well as give customers a chance to get their first home.”
It is the first time the lender has offered a one-day deal. Others, such as Coventry Building Society and Accord Mortgages, have offered a 90 per cent LTV deal over two days. When Accord offered a two-day deal in June, it said they were the two busiest days in its 17-year history.
Nationwide continues to offer deals at LTVs above 85 per cent, but HSBC, which withdrew these from new borrowers last week, operated a daily quota of borrowing, which was typically fulfilled within a few hours. TSB, too, has warned it might withdraw Friday’s offer before 5.30pm, since it had set a maximum lending total.
Mortgage brokers said TSB’s decision to announce the deal the day before it took effect gave applicants little time to prepare. Aaron Strutt, product director at broker Trinity Financial, said: “Taking a mortgage is a big financial decision and it is not something that should be rushed because buyers are in a now or never situation.”
David Hollingworth, director at broker L&C Mortgages, praised TSB for “having a go” in an area of the market that many other lenders had long since eschewed, but added that the fleeting nature of the offer would make it harder for brokers and borrowers to respond.
“To have someone who it’s the right deal for, to give them the information, and for that borrower to make a decision to go ahead, is a tall order in a day,” he said.
Interest rates on the deal are close to TSB’s standard variable rate of 3.59 per cent. SVRs are typically the highest mortgage rates charged by lenders, underlining the profitability of high-LTV mortgages.
Chris Sykes, mortgage consultant at broker Private Finance, said lenders were restricting their high-LTV loans to fixes of five years or longer to ride out any wave of house price uncertainty.
Longer-term fixes carry higher rates, he added, but the deal compared well with some other offerings. “The margin they’re making on it is great and lenders want margin. TSB will still be flooded with applications because their offering is good in the 90 per cent space.”