First Time Buyers In Best Position For Five Years
According to recent data from the Council of Mortgage Lenders, the number of first-time buyers increased by 3% in February, marking the best start to a year since 2008.
First-time buyers accounted for 43% of all house purchase loans in February, the sixth consecutive month that this indicator has been at or above 40%
Mortgage availability is easing for those with modest deposits for the first time in several years, with lenders lowering rates on a regular basis.
But raising a deposit remains a significant challenge. Research has found that the average first-time buyer deposit nationally is just over £27,000, which equates to 80% of average gross wages.
The Government is trying to help people with small deposits climb on to the property ladder though Help to Buy, an equity loan scheme and mortgage guarantee scheme.
Parental help is also becoming more essential. Parents can offer the deposit as a gift to their children, which is preferable to a loan from a lender’s perspective and may increase the amount they can borrow.
Parents can also act as guarantors to help their children secure an affordable mortgage, or use “family mortgage” deals where their savings are put in a linked account to help with a smaller deposit.
Most lenders require a 10% deposit, although there are mortgages available for buyers with deposits – or equity – of just 5%
Those with 5% deposits can get rates of 5.49% for a three-year fix from Melton Mowbray with a £998 fee, or a variable mortgage at 5.69% from Leeds.
The best rates are limited to buyers with deposits of 40% or more, who can get a two-year fixed-rate mortgage for 2.19% from Yorkshire or a five-year fix from N&P at 2.74%
Buyers close to a loan-to-value (LTV) threshold should try to get below it if possible.
If you are at 86% loan-to-value, if you can get it to 85% or just below, that could have a bearing on the rates available.
Mortgage Rates And Fees Continue To Fall
The Legal & General Mortgage Club, which accounts for 13% of all new mortgage lending in the UK, said that despite assumptions that mortgage fees have crept up in recent years, it costs £264 less on average to arrange a mortgage now than it did three years ago. The average mortgage rate has also fallen, by 1.16%
The Government's Funding for Lending Scheme (FLS), which gives banks access to cheap finance in return for lending out cash, has increased the number of mortgages available and helped push down rates. The Bank of England's credit conditions survey this week showed an increase in the number of mortgages available to borrowers for the third consecutive quarter. The biggest improvement was experienced by those taking out mortgages with loan to value (LTV) ratios above 75%.
However, the survey showed that the criteria for who to give a mortgage to are little changed, and that the number of applicants who are being turned down rose slightly.
The survey said that banks expected that mortgage rates would drop further over the next three months.
The FLS has now been extended, and buy-to-let investors may be the next to benefit, as banks will be able to lend on FLS money to property investors.
The Bank of England has said that the scheme, which was due to end in January 2014, will now run until January 2015.
The news comes as HSBC launches the lowest-ever five-year fixed-rate mortgage, at 2.49%, today. It has a fee of £1,999 and is available to those with a 40% deposit or 40% equity in their home. Yorkshire Building Society launched a 10-year best-buy mortgage this week, with a rate of 3.99% for mortgages up to 75%. It has no product fee and the rate is fixed until June 30, 2023. An offset equivalent is available at 4.19%.
Norwich & Peterborough launched a three-year fixed-rate mortgage at 2.49% this week, available to those with up to 40% equity in their home, with a low fee of £295, and incentives including free legal fees.