Lloyds reintroduces 10% deposit mortgages for first-time buyers

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The UK’s biggest mortgage lender is reintroducing 10% deposit mortgage deals, in a sign of increasing confidence in the property market.

The mortgages will be available for first-time buyers from the group’s Lloyds Bank and Halifax brands directly, and via Halifax intermediaries, from 8 December. The maximum loan amount will be £500,000 and the maximum loan-to-income ratio will be capped at a multiple of 4.49. New-build properties will be excluded.

In line with many other lenders, Lloyds pulled its 10% deposit deals around the start of the coronavirus crisis and it has since been offering only 15% deposit deals, meaning buyers have had to find substantially bigger sums to get on the housing ladder.

Lenders increased the required deposits over concerns house prices could fall in the wake of the pandemic, leaving some borrowers in negative equity. The threat of rising unemployment in the economic crisis has also heightened worries about borrowers defaulting on their loans.

Lloyds’ new 10% deals will not be available to existing homeowners, unless a second applicant in a joint mortgage application is a first-time buyer.

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Applicants for the deal will need a higher credit score than for higher-deposit mortgages, and the deals will not be available alongside other “lend a hand” schemes such as Help to Buy.

Jasjyot Singh, the managing director of consumer and business banking at Lloyds Banking Group, said: “We are committed to helping people take their first step on to the property ladder and while there have been record levels of mortgage approvals over the past few months, raising a deposit is still hands down the biggest challenge for first-time buyers. Higher LTVs (loans to value) means we can support more people ready to get a foot on the ladder.”

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The bank has also relaunched a mortgage scheme that enables first-time buyers to borrow up to 100% of the mortgage if their family backs the repayments.

Several other big lenders have also announced plans to re-enter the 10% deposit market. Nationwide Building Society is making 10% deposit loans available for existing mortgage customers looking to move home, as well as for first-time buyers, from the second week of December.

Yorkshire Building Society has relaunched 10% deposit mortgages after withdrawing them in the summer. Its new deals are aimed at first-time buyers and existing homeowners who want to move or remortgage.

According to the national association of estate agents, NAEA Propertymark, just over a fifth of house sales were made to first-time buyers in October, six percentage points down on October 2019.