Bigger deposits leading to higher charges

21-Nov-2007

Fool.co.uk has revealed that buyers who do the hard work and save up for a sizeable deposit on their first home may in fact be paying more on their mortgage than those who save less.

Research from the personal finance website has found discrepancies in the way that higher lending charges (HLCs) are applied across the UK mortgage market.

For example, someone taking out a mortgage with a loan-to-value proportion of between 96 and 100 per cent will find themselves able to avoid an HLC, while others borrowing between 90 and 95 per cent will pay an HLC worth 1.6 per cent of the total loan, according to Fool.co.uk.

So borrowers who put down a four per cent deposit are actually paying less over a two year period than those who pay a five per cent deposit, the website has revealed.

“It is possible to put down a smaller deposit and still pay less. This goes against the grain as intuitively it makes sense to pay the largest deposit you can manage. But remember, it's essential to look at mortgage deals in their entirety taking into account all the costs that apply," said Fool.co.uk mortgage expert Jane Baker.

“It seems that lenders have taken their eyes off the ball, and unwittingly created an opportunity for first time buyers," commented David Kuo, head of personal finance at Fool.co.uk.

"It certainly makes a welcome change for borrowers to find the boot on the other foot, and they should make the most of it before lenders kick the door shut," he added.

New buyers are taking on second and even third jobs in order to secure the best first mortgage possible, Abbey revealed earlier this week.


Extreme measures 'not necessary' for buyers'Variety of options' still open to FTBs

2008: Jul | Jun | May | Apr | Mar | Feb | Jan

2007: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2006: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2005: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar