Battle lines drawn as building society takes on Government

Yorkshire Building Society Group’s range of 36 two- and five-year fixed-rate products has raised the choice of five per cent deposit deals on the market by 56 per cent.

The deals are available through Yorkshire, Barnsley, Chelsea and Norwich and Peterborough Building Societies and the group’s intermediary-only lending arm Accord Mortgages.

They are being offered to first-time buyers and home movers. Remortgage customers will also be able to take them out from 2014.

Mortgage applications worth £365m have been received in 
the first month that the new 
Help to Buy scheme has been running.

A combination of Government initiatives and the Bank of England base rate remaining at a historic 0.5 per cent 
low for more than four and-a-half years have boosted competition among lenders and kept borrowers’ monthly mortgage payments relatively affordable despite stagnant wages and high living costs.

Concerns have also recently been raised about how long borrowers will be able to continue benefiting from these low mortgage payments after a report by the Bank last week suggested that an earlier-than-expected rise in interest rates could be on the horizon.

Yorkshire, which is the second largest building society in the UK, said it is now offering the widest choice of five per cent deals of any UK lender. It said recent consumer research it carried out suggests that a quarter of first-time buyers, home movers and remortgage customers would prefer to take out a mortgage in the “traditional” way direct from a lender rather than using Help to Buy.

The range includes fee-free deals and products with £500 cashback on completion.

Customers can also choose 
to offset their mortgages, meaning that their savings are linked to 
their mortgage and that they pay less interest on what they 
owe.

Only a handful of products have been launched under the new Help to Buy scheme, which 
offers state-backed mortgages to people with deposits as low 
as 5 per cent, although eventually lenders representing most of 
the mortgage market will take part.

Chris Pilling, chief executive of Yorkshire Building Society Group, said: “We are delivering on the aims of this scheme without relying on Government support and offering even greater choice for borrowers.”

The society, which has a 3.6 per cent share of the mortgage market, has no plans to take part in Help to Buy as it believes its products already meet the scheme’s intentions to help credit-worthy borrowers with low deposits.

Mr Pilling said the group has been encouraged to offer the new deals by signs that the housing market is recovering and property prices have stabilised.

He insisted the low-deposit deals will be handed out in a “responsible and prudent way” to make sure borrowers do not over-stretch themselves.

The mortgages will only be 
available on an advised basis to make sure that customers will be able to afford to pay back their loans.

There have been signs that while only a small number of products are available so far under the new phase of Help to Buy, the scheme is having a knock-on effect of ramping up competition among lenders outside the initiative.

Spokeswoman for personal finance data provider Moneyfacts Rachel Springall said: “It’s good to see an increase in competition away from Help-to-buy for 95 per cent loan-to-value deals.”