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Duty bound

The stamp duty holiday to first-time buyers on property under £250,000 is welcome but will not help as many people as the Chancellor predicts.

The bigger issue is deposits and few lenders will entertain borrowers who only have 10 per cent to put down.

There is some encouraging news. Research from Moneyfacts shows the number of mortgage products has risen by 70 per cent since hitting a low last April. By April 1, 2009, there were just 1,209 residential mortgage deals available. Since then, the number of mortgages available has risen, with 2,053 available today.

But lenders still favour those with sizeable deposits. More choice and high loan-to-value ratios are needed. There has been some progress with more products at high LTVs, although rates reflect this “riskier” borrowing. Moneyfacts says there are 152 products requiring a 10 per cent deposit, compared with 71 such deals in April last year and 114 in January 2010. There were 186 mortgages at 85 per cent LTV in April last year, compared with 260 in January 2010 and 345 today. Good news but a slow process.

There are also problems brewing which could halt this progress. Nationwide reported a 1 per cent dip in house prices in February. It said it was too early to suggest a downward trend but many commentators expect prices to fall, which means valuation issues will become increasingly common. Banks will be reluctant to become more aggressive in outlook or positive in criteria if they think prices have further to fall.

With only a handful of lenders doing any real lending, service issues are a concern. Woolwich had to reduce its maximum 70 per cent LTV on its deals to 60 per cent to manage demand but thankfully it has resolved issues and returned to 70 per cent. Santander has been inundated with applications because it is one of the biggest lenders with competitive rates.

Lenders may say they are increasingly open for business with more competition and choice but until they really start lending to FTBs with just 10 per cent to put down, there will be far fewer benefiting than the Chancellor believes.

Mark Harris is managing director of Savills Private Finance


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