Banks Come Under Fire Over 1st Time Buyer Mortgage Rates.

Date Published 25 July 2011

Banks have come under fire for charging FirstBuy applicants hefty premiums.

The scheme, launched at the beginning of the month, aims to provide 10,000 loans to first-time buyers helped by equity being pumped in by developers and the Government.

First Buy borrowers then take out a mortgage on 75% of the value of the property.

However, Halifax is charging FirstBuy borrowers 4.49% for a two-year fixed rate deal, compared with 3.59% for those outside the scheme.

It means that FirstBuy borrowers with a £150,000 loan would be paying £890 more a year than non-FirstBuy borrowers.

Halifax charges no arrangement fee, but Barclays charges £299, and Barclays also charges FirstBuy borrowers more – 4.59%, compared with 3.58% for standard borrowers.

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By contrast, Nationwide Building Society charges a £400 fee but does not charge FirstBuy borrowers extra, allowing them to take any deal in its core range that is available to those with a 75% deposit.

A FirstBuy borrower with Nationwide would pay 3.24% for a two-year fix, compared with Halifax’s 4.49% for the same deal and Barclays’ 4.59% for a three-year fix.

Melanie Bien, of Private Finance, said: `It seems unfair to charge FirstBuy borrowers more, when the whole point of the scheme is to give them access to more competitive mortgages.`

A total of 14 lenders are currently signed up to the FirstBuy scheme.