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It’s been a month since the rebirth of TSB

The 631-branch strong savings bank that puts the focus on local community and the British individual made its first step away from Lloyds Banking Group at the beginning of September with “a portfolio of residential mortgages” worth £4bn and a £40m provision to aid its progress until full divestment in 2014.  Yet, still under the umbrella of Lloyds, TSB will be lending its local touch to LBG’s commitment to the high-value mortgages now offered under the Government’s much discussed Help to Buy scheme, with the aim to give young home buyers “the same chance to get on the property ladder as their parents” and revivify the construction industry.

Indeed, David Cameron’s “vision for Britain; a country where everyone who works hard can get on in life”, and own their own property, ties in well with TSB founder, Reverend Henry Duncan’s original outlook.  A lot’s been written on the Help to Buy scheme in recent weeks, with 1 million people in Britain predicted to use it within the next 12 months, but while it positively revives the housing market by increasing confidence in both an ability to buy and sellers’ upped pricing of their properties (though not to pre-recession levels), at the same time some are concerned that there will be a repeat of the market’s previous ‘overheating’.  Knight Frank reported “an 8-year high” for mortgages just last month and there are fears a new housing bubble will develop.

For it looks like the second phase – launched three months prematurely by the Chancellor – could pose problems.  As of last week, buyers were given access to 95% taxpayer-secured mortgages on all property up to £600,000 (as opposed to the first phase’s 75% on new-builds only), the second phase promoting a minimum 5% deposit with 15% mortgage guarantee to the lender.  To support this, the Treasury will need to guarantee at least £4.5bn, with the overall cost of the Help to Buy scheme coming in at “£12bn of guarantees on up to £130bn of debt”.

As it is, TSB is offering two-year fixed mortgages on up to 90% of the purchase price.  First-time buyers will receive an initial rate of 4.89%, fixed until the end of November 2015, while previous home owners are offered 4.79%.  Five-year fixed mortgage rates rise to 4.89% for new buyers and 4.99% for previous home owners.  There is also the option of a seven-year fixed mortgage rate on borrowing between 85% and 90% of the property price, for first-time buyers only, of 4.69%.

Of course, Help to Buy is rather crucial in a country where many must live with parents until they’ve enough money for a deposit on houses which are increasing in cost once again, to an average of over £170,000 (Rightmove “predicts an autumn price surge” of a further 6%).  Given the scheme’s low deposit percentage, the historic problem of finding 25% deposit for any chance of a mortgage has been bid a welcome farewell – for now.