Yorkshire stokes mortgage market competition

Yorkshire Building Society sign
Image caption The Yorkshire Building Society Group is the second biggest building society in the UK

Competition for homebuyers with little in savings is picking up, as a building society has unveiled a string of new deals outside the Help to Buy scheme.

The Yorkshire Building Society is offering a host of new mortgage products for people offering a deposit of 5% of a home's value.

Some of the rates are lower than the initial offers from banks signed up to the government's Help to Buy scheme.

The move comes amid warnings of an overheated UK housing market.

Meanwhile, new data from the Council of Mortgage Lenders (CML) indicate the UK mortgage market is continuing to revive.

Gross mortgage lending rose to its highest level for five years, reaching £17.6bn in October. This was a 9% increase compared with September and 37% higher than the low levels of lending seen a year earlier.

Solid borrowers

The Yorkshire Building Society Group, the second-largest building society in the UK, said it was now offering the widest choice of 95% loan-to-value deals among UK lenders.

The new mortgages are being offered through its Yorkshire, Barnsley, Chelsea, and Norwich and Peterborough Building Society brands, as well as its Accord Mortgages lending arm, which serves brokers.

A number of other lenders offer this type of home loan, but often with restrictions, such as on the size of the loan.

"The 95% mortgage is back," said Aaron Strutt of mortgage brokers Trinity Financial. "There is now active competition for these mortgages."

However, he added that successful applicants for these loans would generally need a faultless credit history and prove they could make the repayments.

Help to Buy questions

RBS and NatWest are offering home loans to potential buyers offering a 5% mortgage under the second phase of the Help to Buy scheme, through which the government provides a guarantee for part of the loan. Other banks have registered for the programme, with promises of deals in the new year.

However, no building societies have signed up to this UK-wide second phase of the scheme, which requires the lenders to pay a fee.

In a speech, the chairman of the Building Societies Association (BSA), David Cutter, said: "I question whether such a scheme was ever needed by building societies.

"Many have been consistently lending in the lower deposit space for months and some for years."

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Media captionAndy Caton from Yorkshire Building Society says its range of 95% mortgages marks "a return to traditional lending"

Chris Pilling, chief executive of the Yorkshire Building Society, said: "We support the intentions of the Help to Buy mortgage guarantee scheme in encouraging more lenders to provide lower deposit mortgages, but are able to deliver on its aims without relying on government support.

"House prices have stabilised and improved recently to make this the right time for us to offer such a wide selection of competitive 95% mortgages, and they address the toughest obstacle faced by first-time buyers, and some next-time buyers, which is raising a big enough deposit.

"Our fundamental role as a building society is to support, in a responsible and prudent way, as many people as possible achieve their aspirations to buy their own home."

'Build more homes'

Concerns have been raised about whether schemes to encourage the return of home buyers could create a housing bubble.

Image caption Buyers with little to offer as a deposit have found it difficult to secure a mortgage

On Monday, the British Bankers' Association called on UK Chancellor George Osborne to outline an exit strategy for the three-year Help to Buy scheme.

The next day, the Organisation for Economic Co-operation and Development (OECD) said it was "urgent to continue to relax the barriers to housing supply to prevent overheating in the [UK] property markets".

This was echoed by Mr Cutter of the BSA.

"Ultimately, the only thing that that will be a counter-balance to unaffordable house prices, the factor that locks so many first-time buyers out of the market, is to build more homes," he said.

"There has been a modest uplift in new housing starts, but nothing yet approaching what we need."

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