Jury is out on whether Post Office deal will be open to adverse clients

PETER MANDELSON, EXPANDING POST OFFICE SERVICES
PETER MANDELSON, EXPANDING POST OFFICE SERVICES

The Post Office says it is too early to say whether its proposed first-time buyer 90% LTV product will cater for adverse borrowers.

As part of Labour’s election campaign, business secretary Peter Mandelson has announced an expansion of the financial services offered by the Post Office, which will include a new range of mortgages.

He wants the Post Office to offer a mortgage deal at 90% LTV aimed at first-time buyers.

The government is also aiming to double the value of the Post Office’s mortgage book in 2010/11 – a move that will be funded through its joint venture with the Bank of Ireland.

The Post Office has not given details about the products, but wants to offer affordable credit to people on low and modest incomes.

David Hollingworth, mortgage specialist at London & Country, says he would be surprised if the Post Office offered any form of adverse lending, but he welcomes another lender offering 90% LTV deals.

He says: “It is hard to say whether the products will revolutionise the market without seeing the detail, but what they might do is encourage other lenders to offer more 90% LTV deals.”

Mandelson plans to inject £180m of new government funding into the Post Office in 2011/12 to maintain the network at around its current size. This goes beyond the £1.7bn that is already being invested between 2007 and 2011.

The Post Office will launch an account this year that aims to kickstart the savings habit.

The Saving Gateway account, for people of working age on lower incomes, will see the government add 50p for every £1 saved.

Mandelson says: “The Post Office is a well-loved community institution and this move will bring more banking services back to the heart of those communities.”