Lloyds Banking Group’s has pledged to lend £6.5 billion to first time buyers (FTBs) in 2013, with the assistance of the government’s Funding for Lending Scheme.
The group expects to assist an estimated 60,000 people in buying their first home, lending a maximum of 90 per cent of a property’s value and up to 95 per cent on selected schemes.
Rival Barclays also recently launched a first-time buyer incentive in the form of its Family Springboard Scheme, which requires a 10 per cent savings deposit to be made by relatives of FTBs.
Ben Thompson, MD of Legal & General Mortgage Club commented on Lloyds’ pledge to lend £6.5bn to first time buyers this year:
“This impressive sum has been in part subsidised by the Government’s Funding for Lending Scheme (FLS), from which Lloyds Banking Group has so far drawn £3bn.
“Whilst this is no doubt good news for First Time Buyers, the real winners still remain the fortunate few who fall into the ‘low risk’ category of lending.
“Following the launch of the FLS, the cost of funds has reduced drastically, resulting in fierce competition among lenders to attract these ideal borrowers. However, there is a large market of first time buyers who remain underserviced, with low risk lending becoming increasingly commoditised and overcrowded.
“As a result of this, at some point there will need to be a shift in lending criteria, with banks and building societies moving up the risk curve and offering higher Loan to Values (LTVs), in order to maintain profit margins.
“Having said that, this move from Lloyds Banking Group is definitely a welcome step. What we now need to see is other lenders following in its footsteps and launching other innovative ideas to ensure the market can continue to grow and to allow more buyers to finally get onto the ladder.”
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