HSBC offers home loans to buyers with 10% deposit

HSBC offers home loans to buyers with 10% deposit

Homebuyers with small amounts of money to put down on their new homes will find it easier to secure a mortgage from next week, after a £1bn loan promise by one of Britain's biggest lenders.

From Tuesday HSBC is increasing the maximum amount it will lend as a proportion of the value of the property being mortgaged - the loan-to-value (LTV) ratio - to 90%. The bank is making £1bn available to housebuyers with deposits of 10% at a two-year fixed rate of 4.99%.

It is a marked improvement for first-time borrowers and other buyers with small deposits. At the beginning of 2008, borrowers could get mortgages worth more than the value of their properties. But by the end of last year, most lenders had reacted to falling house prices and a steep increase in borrowers defaulting on their debt by reserving the best deals for people with deposits of at least 40%.

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HSBC was among the lenders that required larger deposits, but it started relaxing its criteria last week with the introduction of competitive tracker loans for borrowers with 15% deposits.

The latest move also reflects HSBC's growing role in the mortgage business. It now has 10% of the market and has allocated £15bn for new mortgages this year. The bank lent half that amount in 2007 before the credit crisis devastated the sector and many of HSBC's rivals.

Joe Garner, group general manager of HSBC's personal financial services division, said: "Although house prices have fallen, and continue to fall, they won't fall forever. These changes mean we can continue to give customers the best possible deal on their mortgage."

The relaxation in lending criteria for buyers has been welcomed by mortgage brokers and product comparison sites.

Michelle Slade, spokeswoman for price comparison website Moneyfacts, said: "We are starting to see signs that mortgage lenders are more willing to lend and it appears we have finally turned a corner. It suggests that HSBC believes that house prices have started to get as low as they are going to go. They obviously now feel that they can offer such mortgages without the fear that the borrower will quickly fall into negative equity."

"Hopefully other providers will follow HSBC's example and more providers will offer competitive deals for those with small deposits, which will help kick-start the mortgage market further," she said.

Melanie Bien, director of mortgage broker Savills Private Finance, said: "There are 90% deals available elsewhere, but they're not as competitive as this. A 10% deposit is do-able for many first-time buyers, even if some still have to resort to the bank of mum and dad for a top-up."

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