The mortgage war between lenders reignited last week. HSBC has retaken pole position in the best buy tables for mortgages launching a five year fixed rate of 1.69% for those who have a minimum of 40% deposit. The loan carries a fee of £999 which is lower than many typically tied to an ultra-low deal such as this.
The only other deal that comes close is from Yorkshire Building Society, which offers a two year discounted variable rate of 0.89% to those with a 35% deposit. However, it comes with a substantial arrangement fee of £1,495.
Lenders are fighting for new business and the above rates demonstrate this. However, the high deposit levels required will be a barrier to many first-time buyers. With uncertainty around Brexit negotiations, many buyers are holding out for rates to dip further. However, most brokers are in consensus that rates are close to the bottom of where they can feasibly go.
The high deposit levels required mean that the bank of mum and dad is playing an increasingly important role. According to new research from Legal and General in association with CBRE, this year parents are expected to lend £6.5 billion, contributing to more than 2980,000 mortgages and accounting for 26% of all property transactions. This is a 30% increase on the £5 billion loaned in 2016.
Across the UK the average of borrowing from mum & dad currently stands at £21,600 with the amount borrowed in London at £29,400.
To put these figures another way, the bank of mum & dad is now the 10th biggest lender in the UK.
Whether or not this is sustainable, it is symptomatic of the ‘affordability’ problem, exacerbated by the shortage of new homes, especially in London. Kate Faulkner, author of Which? Property book states:
“We must remember that the increasing use of the bank of mum and dad is a symptom of the lack of housing in the UK not the solution, so we need to build enough homes to match population growth.”