A month ago, the government trumpeted its new initiative to get the mortgage market moving. The Funding for Lending scheme was designed to give banks and building societies access to funds at low interest rates, allowing them to lend these to households and small businesses in the form of loans.
However, new research from a leading data analyst has found that the recent mortgage rate cuts appear to be only helping people up the property ladder or who have a large deposit. And experts are concerned that the new scheme will have no impact on first-time buyers.
Financial data analysts Moneyfacts have revealed that over 200 mortgage products saw their rates cut over the month of July, but only those with large deposits are benefiting. Sylvia Waycot from Moneyfacts says that the bulk of the rate reductions were for deals only available to borrowers with a high deposit. She commented: "Current evidence suggests that those in the 90% or higher loan-to-value bracket are not the ones getting the best value from the recent rate cuts."
The Daily Telegraph reports that "the figures will exacerbate fears that the government's Funding for Lending scheme, aimed at reducing high mortgage rates, will not help its target group of hard-hit first-time buyers. The new scheme will open for British lenders on August 1st".
Keith Osborne from whathouse.co.uk says: "It will be interesting to see whether the government's new scheme will make any difference to the mortgage deals available to first-time buyers. Most of the recent rate cuts have been to deals that are only available to people with a large deposit - up to 40% in some cases - and it won't be these people that help the property market to recover. Unless the scheme filters down to people that need good value mortgage deals the most, I don't see it having a positive impact on the housing market."
Some lenders have already said that they will use the funds to target first-time buyer mortgages. For example, the Royal Bank of Scotland has promised to focus on first-time buyer deals aimed at those people who have deposits of 5% or 10%. The bank recently launched a fee-free 4.79% five-year fixed rate for first-time buyers borrowing up to 90% of the property's value.
The Telegraph also reports that the bank offers a fee-free 4.79% five-year fixed rate for buyers of new-build properties through the government's NewBuy scheme, up to 95% of the property's value.