Moneyfacts, the financial data provider, said the number of deals where people were able to put down a deposit of just 5% or 10% had risen to its highest level since March 2008Photograph: Tolga Akmen/EPA

UK lenders are stepping up a mortgage price war, with HSBC (HSBA.L) and the Co-operative Bank announcing fresh rate cuts, and Halifax and Lloyds Bank (LLOY.L) loosening their affordability rules to enable homebuyers to borrow more.

The number of low-deposit mortgages that let buyers borrow up to 95% of a property’s value has hit a 17-year high.

In recent days, lenders have started cutting their mortgage rates in apparent response to the financial turmoil and changed expectations on UK interest rates sparked by the US trade tariffs.

On Thursday last week, Barclays (BARC.L) became the first “big six” lender to cut the cost of some new fixed-rate deals to below 4%, after similar announcements by some smaller players.

Now, more major lenders are announcing reductions, improving the options on offer for first-time buyers, home movers and those looking to remortgage.

On Tuesday, HSBC said it would be cutting rates across a range of products with effect from Wednesday 16 April, with full details of the new pricing yet to emerge.

The Co-operative Bank said it would be relaunching its mainstream and buy-to-let mortgage ranges on Thursday 17 April. It said it would be reducing rates on new two- and three-year fixed deals for homebuyers by as much as 0.26 percentage points, with equivalent deals for those looking to remortgage being cut by up to 0.18 percentage points. Other lenders announcing rate reductions include Gen H.

At the same time, several leading lenders have followed the example of Santander last month (BNC.L) and relaxed their affordability rules. The changes made by Halifax, Bank of Scotland, Lloyds Bank and BM Solutions – all part of Lloyds Banking Group – mean a typical household applying for a mortgage could potentially borrow £38,000 more, thereby making it easier “to turn their dream home into a reality”, according to a spokesperson.

When lenders decide whether to approve a home loan, they assess whether a borrower could still afford the repayments if interest rates rose. But the Financial Conduct Authority said recently that the way some lenders were doing these stress tests “may be unduly restricting access to otherwise affordable mortgages”.

The Lloyds group brands are lowering their stress test rates with immediate effect. “The effect of these changes is that customers will, subject to full affordability testing, be able to borrow more than they can currently,” said the spokesperson, adding that typical customers may see increases of about 13% in the maximum loan available.

The group gave the example of a couple with two dependant children and a total household income of £75,000 who, depending on the product they chose, previously might have been able to borrow a maximum of £286,000. The latest changes could lift this to £324,000.

Moneyfacts, a financial data provider, said the number of deals where people were able to put down a deposit of just 5% or 10% had risen to its highest level since March 2008 – a development that is particularly good news for first-time buyers, who can often struggle to amass a sizeable deposit.

View Comments