Figures released by the Council of Mortgage Lenders (CML) this week showed that first time buyers’ share of the mortgage market fell in July to its lowest level for 3 years. The number of mortgages taken out by First Time Buyers in July stood at 19,400 – down from 19,700 in June and from 20,100 July 2009.
CML’s figures also show that buyers of their first home are, on average, putting down a deposit of 24% – this equates to around £40,000 depending on whose house price figures you look at. Even with help from the Bank of Mum & Dad, this is a substantial sum of money, but to those who don’t have such support and are trying to save up themselves, it must seem like an unachievable amount.
There is some good news however as a number of lenders have been starting to open up more and more deals to homebuyers with smaller deposits.
The best deals on the market are still only available to those fortunate enough to be able to put down 25% or even 40% of the value of a new home, but we’re gradually seeing more deals available to those with a more modest 15% or 10%.
There are even one or two options for those with just 5% to put down, although if you’re in this camp, then expect some fairly strict conditions from the lender.
National Counties Building Society is the latest lender to offer a new deal available up to 95% LTV. Called their “Family First Guarantor Mortgage”, it offers a 3-year fixed rate at 4.99% and requires a guarantor to offer additional security. The lender will take a charge on the guarantor’s main residence where the amount being borrowed is in excess of 75% Loan To Value.
A similar deal is on offer from Bath Building Society, called the “Parental Assisted Mortgage Scheme”, although it only offers variable rates. Buyers who can muster up a 10% deposit will have a better choice of deals and the opportunity of getting a mortgage on their own – lenders now offering decent deals to those with a minimum deposit of 10% include HSBC, Newcastle Building Society, Skipton and Cheltenham & Gloucester.
If you’re buying your first home, here are some key things to consider, particularly if you’re buying with a small deposit:
- Affordability – have a good look at your budget and make sure you can afford the mortgage. Consider a fixed rate if you’re at all concerned about meeting your mortgage payments if rates rise.
- If you’re getting a mortgage with help of a guarantor, it’s important that they know what the implications are for them – it could affect their ability to borrow money themselves in the future.
- When buying your first home, don’t forget to budget for the other costs that you’ll come up against; survey costs, legal fees and stamp duty…
- The good news is that for first time buyers, there is currently no stamp duty on properties worth up to £250,000.