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Youngest and oldest benefit from changes to residential mortgages

Due to falling mortgage rates, first-time buyers are making annual mortgage savings of approximately £800, a new tracker reveals. Older homeowners, meanwhile, look to benefit from Halifax’s decision to raise its maximum age limit.

Genworth’s Moneyfacts LTV tracker has found that first-time buyers with a 10% and 5% deposits, who bought in March 2016 as opposed to March 2015, will make savings of £804 and £792 respectively, over the course of the year.

The figures are based on a typical first-time buyer house price of £154,599. However, in many areas of the UK the saving is offset by rising house prices.

Simon Crone, Vice President – Mortgage Insurance Europe, Genworth says:

“Competitive rates available for those with just 5% or 10% deposits mean they are able to make huge savings compared to what they would have paid for the same loan in previous years.

“This is important for a group who face numerous challenges to enter the property market, typically facing far higher costs than those with the parental support to gather together a larger deposit.”

However, Crone goes on to speculate that when the Help to Buy Mortgage Guarantee scheme finishes at the end of the year (due to the Basel capital requirements coming into effect), appetite for lending to those with small deposits will decline further and many more hopeful first time buyers will be priced out unless they can secure help with a deposit.

“First time buyers are crucial to the health of the wider housing market and failure to adequately support them will have a knock-on effect to other homeowners.”

“While the government has put in place a series of short-term fixes, a permanent solution is the only way to resolve the housing crisis.”

“Government intervention through Help to Buy has shown mortgage insurance is effective at encouraging high LTV lending without inflating risk or reducing standards.

“The private sector can now offer a longer term solution that removes risk from the taxpayer while boosting homeownership to a wider group.”

Nationwide’s decision to raise its maximum lending age by 10 years to 85, will make a positive impact on the range of options available to older home owners.

The second major lender to revise its policy criteria in a week, Nationwide has introduced the highest age cap of all the high street lenders so far.

As from July this year, existing customers with retirement income will be able to borrow up to the age of 80, based on the loan being repaid by time they are 85.

Available on loans up to a maximum size of £150,000, all Nationwide products to 60% loan-to-value (LTV), will carry this option.

Henry Jordan, Head of Mortgages, Nationwide said:

“We are taking a series of steps to meet a growing demand from customers to be able to borrow in later life. These customers are often asset rich, with significant equity in their home, and they wish to have the flexibility to borrow against it.

“Access to the mainstream market has been a challenge for older customers, resulting in their needs going unfulfilled. This measure helps to address these needs in a prudent, controlled manner. Nationwide is committed to providing a range of options for all customers and this will be the first step toward developing a wider range of options for those looking to borrow into retirement.”

Despite Halifax also increasing its maximum lending age from 75 to 80 last week, it has been reported that the majority of banks are taking their time to revise policies on age caps.