First-time buyer activity is crucial in order to keep the property market moving. However, for many, it’s been a challenging year, with 69% no longer able to afford their purchase.
In fact, it’s estimated the difficulty first-time buyers are experiencing in purchasing their first home is putting a staggering £5 billion worth of property deposits in limbo.
The financial impact of the pandemic has meant that lenders are pulling a number of high loan-to-value (LTV) mortgages, meaning first-time buyers with smaller deposits have far few options.
92% of all 90% LTV deals were pulled from the market since March, narrowing the window for buyers with a 10% deposit.
Additionally, the economic climate and introduction of the government’s furlough scheme triggered a tightening of criteria and increased scrutiny across all applications.
In the last six months, for example, Nationwide capped gifted deposits from ‘The Bank of Mum and Dad’ and TSB refused to accept furloughed income on applications – just two examples of high street lenders clamping down.
Alongside this, the introduction of the stamp duty holiday saw demand for properties soar and with it house prices too.
We’ve seen a month-on-month increase as buyers race to beat the stamp duty holiday deadline.
Demand from buyers has created such significant backlogs in processing applications that our data shows it currently takes around 115 days to complete on a property in the UK. This is also having an impact on house prices, with a 7.6% increase in the past year.
As house prices continue to rise, first-time buyers have no option but to increase their deposit amount or seek financial help from family and friends. But, our research shows that over half (53%) of first-time buyers are now buying in a town or suburb, with 12% opting for a village and 6% a rural location.
This shift away from cities might be due to lower regional house prices where first-time buyers can purchase a home with a smaller deposit. This can be seen on Trussle’s regional map of varying first-time buyer deposits.
However, there’s light at the end of the tunnel. We’re beginning to see lenders reintroduce higher LTV mortgage products, providing hope for first-time buyers looking to get onto the ladder with a smaller deposit.
Whilst the range of high LTV products is still vastly inferior compared to the levels available before the pandemic, if this trend continues the market could become more accessible to first-time buyers over the next few months.
If you’re looking to purchase your first property, we have the following tips to help boost your chances of securing a mortgage that’s right for you:
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Save towards your deposit
It’s important to know that the overall number of mortgages on offer has decreased, especially for those with smaller deposits looking to obtain a 90% or 95% loan-to-value (LTV) mortgage.
If you’re able to, it’s worth trying to use this time to save more towards a deposit of at least 10%. Reduce outgoing expenses where possible and use a budget planner to manage your monthly spending. This could ultimately mean that you can save more money towards your dream home.
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Shop around for the best deal
Finding and securing the right mortgage can seem daunting, so it’s important to spend the time to ensure you get the best possible deal for your circumstances.
Don’t be drawn in by those that have the lowest headline interest rates as there may well be high product fees or other hidden charges.
Using a mortgage broker will help you find the right deal for your circumstances, factoring in monthly repayments, additional fees and cashback. Trussle has access to more than 12,000 deals across 90 lenders and finds the most suitable deal for you based on your own personal and financial situation.
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Plan for additional costs
It’s important to remember that there are additional costs that come with buying a home, so remember to plan for contingencies. Some examples of these costs include removal services, maintenance and repairs, and additional legal fees.
It’s also worth considering that the stamp duty holiday comes to an end on 31 March 2021, and average wait times now exceed the amount of time left before the holiday ends. We’d encourage those saving for a deposit to budget for Stamp Duty, if applicable, to avoid facing any unexpected costs.
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Be smart with your finances
Buying a home is a huge financial commitment and mortgage lenders will want to see that you’re a trustworthy borrower. Closing any unused bank accounts and paying off your credit card each month will help to get your credit score in check and boost your chances of being accepted for a mortgage.
If you haven’t already, consider looking into the government-backed schemes available to really maximise the amount of money you’re putting away.
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Find out what you can afford
A Mortgage in Principle, (also known as a Decision or Agreement in Principle), is a statement, usually from a lender or mortgage broker, to say that you may be able to borrow a certain amount of money.
Securing a Mortgage in Principle enables you to have realistic expectations of what and where you can afford so that you won’t be disappointed further down the line. You can get a free Mortgage in Principle from Trussle online in minutes.
Additionally, using an affordability calculator is a great way to understand what you’ll be able to afford so that you can manage your expectations from the beginning.
Miles Robinson is head of mortgages at online mortgage broker, Trussle
