A&L and Britannia reduce LTVs

Prospects for first-time buyers look even bleaker this week, with the news that two of the UK’s biggest mortgage lenders have doubled the minimum deposit needed to get a foot on the property ladder.

Alliance & Leicester and Britannia building society have upped their minimum deposits for new buyers from 5% to 10%, which means that a typical first-time buyer currently paying £147,834 for a home needs to raise £14,783, rather than £7,392.

According to Moneyfacts, the financial data website, other lenders are also tightening their criteria, with 11 mortgage providers having reduced their maximum loan-to-value (LTV) ratios since early December.

The trend is in direct response to the credit squeeze, as before last summer’s turmoil on the money markets LTV ratios were commonly 95% and some were as high as 130%.

Northern Rock has been a leading provider in the high LTV market; its “Together” product was particularly popular with first-time buyers, offering 125% LTV mortgages.

However, when the bank’s difficulties became national news, other lenders rapidly withdrew from offering 95% and 100% loans.

Earlier this month Scottish Widows, which specialises in mortgages for professionals such as doctors and lawyers, reduced the maximum LTV offered from 102%, to 95%.

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