In the first deal of its kind, Bovis Homes and Barclays have agreed to offer loans up to 90 per cent of purchase price. But instead of Barclays taking on the financial risk, Bovis will indemnify the bank if a borrower defaults forcing repossession.
With mortgages still in short supply and lenders demanding big deposits, the move is welcome news for homebuyers following yesterday “austerity” Budget. According to Moneysupermarket.com, there are only 3,100 mortgage deals available today. In June 2007 there were 28,413. And there are 174 deals allowing people to borrow 90 per cent of their property’s value compared with 763 deals three years ago.
Lenders are particularly wary about new-build flats and houses because of concerns about resale values. Whereas Halifax requires a 10 per cent deposit on older properties, it wants at least 20 per cent on a new home. Even borrowers with spotless credit ratings are suffering because of the general reluctance to lend.
Bovis says it will set aside a percentage of the value of the house into a pot of funds for potential defaults. Called Perfect 10, the loan deal is available through Barclays’ Woolwich mortgage arm. At the moment, the lender is offering a two-year fix at 4.99 per cent, with three-year unemployment payment protection included.
Bovis builds mainly in the Home Counties and currently has properties for sale at developments in Essex, Kent and East Sussex.