Abbey cuts deposits

At long last some rather more competitive deals are beginning to trickle into the mortgage market. Today (Friday) the UK??â??â??s second biggest lender, Abbey, owned by the Spanish Bank of Santander, is cutting the minimum deposit necessary for its best fixed-rate deals to 30 per cent from 40 per cent.

It means buyers will still have to find a hefty down payment ??â??â?? but slicing ten per cent off the required deposit can only be applauded.

Abbey is offering a two-year fixed rate at 3.65 per cent on deals worth 70 per cent of the value of a property. It will charge just under ??Â?1000 as the arrangement fee.

Given that the past months have seen nothing but a tightening of mortgages any loosening up will be seen as encouraging for the market and further evidence that the property market is slowly starting to pick up.

The Bank of England??â??â??s latest decision not to tamper further with interest rates ??â??â?? but to hold them at their historic low of 0.5 per cent - is being interpreted by many property professionals as a sign that rates will be kept low for at least another year, possibly two.
This view is compounded by the Bank??â??â??s view that recovery from the recession will be slow and protracted and will take longer to achieve than had been earlier predicted.

The Abbey cut is almost certain to trigger copy-cat moves by competitors which is good news for putative borrowers.

The property market, though, is still hampered by a reluctance on the part of sellers to bring their properties to market in the vain hope that increased stability will bring in its wake a rise in property prices. There is little evidence to support such hopes, and certainly not in the short term. In today??â??â??s property market cash remains king. And first-time buyers need either rich parents or friends to be able to stump up deposits.

A further brake is that even at 30 per cent the mortgage market is still a universe away from offering competitive pay-back rates and 10 per cent deposits, a combination which was commonplace when the market was buoyant.

When similar combinations are offered by lenders, who remain still largely timid and recalcitrant, and who are insisting that borrowers meet corset-tight lending criteria, that first-time buyers, who are vital to the market, will be able to get on the housing ladder.