A&L hikes rates for low deposit borrowers

A&L hikes rates for low deposit borrowers

Alliance & Leicester, the UK’s ninth-largest mortgage lender, has increased interest rates for new customers with less than a 25% deposit.

Borrowers needing to raise between 76% and 90% of a property’s value will now be charged 6.49% on a two-year fixed-rate mortgage, rather than 5.74%.

The 0.75 percentage point increase adds A?864 per annum to the cost of a typical A?158,000 mortgage.

Rates on two-year tracker loans are also rising, from 5.99% to 6.39%, for those needing a higher loan-to-value ratio.

Since the beginning of the year, the lender has also been increasing fees for some customers, having replaced flat charges with fees based on a percentage of the loan.

As this week saw the mortgage market continue to shrink, with fewer borrowers able to secure attractive interest rates on loan-to-value ratios of over 75%, a number of dire warnings on the UK property market have been reported.

Iain Cornish, chairman of the Building Societies’ Association, is not convinced that the Bank of England’s A?50 billion injection of cash will unfreeze mortgage lending and Michael Saunders, an economist at US bank Citigroup, believes the UK could follow the US into a serious housing market crash.

Meanwhile, Alastair Stewart of Dresdner Kleinwort has highlighted conditions in the UK housebuilding sector, where new sales fell 65% last month, as a result of waning confidence in the market and the mortgage famine.

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