Leading lenders aid low deposit purchasers

mform.co.uk, the online mortgage broker, is advising house buyers who only have access to small deposits to focus their search for a mortgage on the leading lenders.

In its survey, mform discovered that almost three-quarters of mortgage lenders applied higher lending charges to borrowers with small deposits.

The charges, which provide mortgage guarantee insurance, are generally applied when the size of the loan is over than 75% of the value of the property.

In this way the lender is protected if the property has to be repossessed, and the value of the property has fallen below the value of the loan.

The fees range from between 7% and 12%, although they are usually applied to part of a loan, depending on the size of the mortgage and the property value.

The UK’s top 20 lenders are less likely to apply such charges and when they are applied it is usually because the deposit is minimal.

According to mform, there are currently 29 lenders offering loans of up to 95% of the value of a property, without additional charges.

Of these, 12 will also consider lending first-time buyers over 95%, without increasing the lending charge.

Lenders in the category include Bradford & Bingley, Cheltenham & Gloucester and Scottish Widows Bank.

For anyone on the verge of making a purchase, HSBC will be of interest as it has removed all fees on its standard mortgages, including booking, completion, exit and higher lending charges, until 30 September.

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