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Major UK Bank Offers 90% Mortgages Due to Buyer Demand

MORTGAGES | 22.12.2020

A wave of UK banks and building societies have restarted lending to homebuyers with small deposits, as continued demand appears to ease fears over house prices. Ever since the market reopened back at the beginning of summer, many mainstream lenders have been cautious about risky mortgage lending. Now major UK bank, Natwest, has become the latest to once again offer 90% mortgage deals.

Customer demand vs uncertain house prices 

It certainly seems as though first-time buyers will be able to breathe a sigh of relief with this new wave of low-deposit mortgages flowing back to the market. The pandemic saw many low-deposit deals withdrawn by lenders, leaving a large number of borrowers needing to raise deposits of at least 15% to secure a deal. It appears that things are changing now, as 90% mortgages are getting relaunched. Natwest has returned to offering 90% LTV (loan-to-value) due to an increased capacity in the system as a result of the high demand from customers. This coupled with the uncertain and volatile outlook for house prices allowed the bank to relaunch their higher LTV deals, at least according to the bank’s head of mortgages, Lloyd Cochrane. The outlook for customers at the moment looks to be a lot more potisite, especially for first-time buyers looking to get on to the property ladder. Lloyds Banking Group, which also owns the Halifax brand, has also announced it would be relaunching some 90% mortgage deals with additional affordability criteria. In November, Yorkshire Building Society resumed offering 90% loans to encourage borrowers.

What are 90% mortgages?

A 90% LTV mortgage deal refers to the amount a person is borrowing in relation to the value of the property being purchased. The difference, which in this case is 10%, is the deposit that needs to be put forward by the borrower.  The lender will have more risk to consider when the ratio between the borrowing amount and the value of the property is higher.

Should you consider a 90% mortgage?

90% mortgages can generally be more expensive than lower ratio mortgages. Again, this is due to the increased risk. To compensate for this, a lender will typically charge a higher interest rate, which will accumulate over the course of the mortgage.  If you have a larger deposit to put down, and therefore you can afford to choose a lower interest rate option, you should consider this. A lower LTV ratio deal will likely result in you having a lower interest rate and lower costs over the total span of your mortgage, but you should also consider your savings of course. As the cost of buying a property will also include solicitor fees, possible stamp duty and arrangement fees, for example. Purchasing a property can also lead to other unexpected costs, such as repairs. So it can be very important to keep a portion of the property value saved just in case.  Speak to an experienced mortgage broker today, who can search the market and ensure you get the right deal. Our team can guide you through all the options available to you, to find you the best deal for your specific circumstances. For more information get in touch with us today on 0345 305 2540, or at info@taylormade-finance.co.uk.
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