Until recently there has only been a very limited range of mortgage products available for first time buyers with smaller deposits, but there are now signs of improvement, with a growing number of lenders gradually re-introducing deals for those needing to borrow a higher percentage of the property value.
The government’s announcement on 8th July that stamp duty will be cut to zero for properties up to £500,000, combined with the re-opening of the property market as lockdown restrictions have eased, may have helped convince some lenders to return to higher loan-to-value lending.
Nationwide, for example, has increased its lending limit to 90% of the property value from 20th July for first time buyers, having previously maxed out at 85% loan to value (LTV).
Henry Jordan, director of mortgages at Nationwide Building Society, said: “While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home.”
Existing mortgage customers with the building society who are moving home will be able to continue borrowing up to 95 per cent LTV, whilst for those looking for additional funds the maximum has increased to 90 per cent LTV.
Metro Bank has also returned to 90% lending, for homebuyers and those looking to remortgage. The bank won’t, however, offer further advances over 80% LTV.
TSB similarly has re-introduced its 85% LTV house purchase and remortgage products to support customers with lower deposits.
Check eligibility criteria
Although there are a few more deals emerging for homebuyers with a 10% deposit, choice remains more limited and there can be some limits placed on eligibility. There may also be restrictions on the type of property that lenders will offer mortgages on.
For example, Nationwide won’t lend up to 90% on flats or new builds, and the maximum mortgage term borrowers will be able to choose is 25 years.
Lenders may also apply a higher credit scoring expectation for applicants requiring higher LTV mortgages. You’ll need to meet their affordability assessment so that they can establish you can afford the monthly repayments.
To get an idea of the mortgage options that may be available to you, take a look at our best buys for those with smaller deposits. You can also use our calculator to find out how much you could borrow.
Market update: More support for first time buyers