At the peak of the banking crisis mortgages requiring a 10% deposit or less virtually disappeared leaving little option for first-time buyers. In recent years the availability of such mortgages has steadily risen and the increased competition amongst lenders in this sector has resulted in a significant reduction in rates.
Latest figures from Moneyfacts show a four fold increase in the number of mortgages requiring a 10% deposit or less, increasing from 84 in May 2009 to 338 today. Over the same period the average rate on a two-year fixed mortgage at 90% LTV has fallen from 6.09% to 5.51%.
The market for first-time buyers in 2012 continues to look favourable with lenders such as Nationwide continuing to bring competitive rates and product innovation to the market. In order to ensure they are successful in getting onto the first rung of the housing ladder, first-time buyers can take steps to improve their chances of being accepted for a mortgage.
Lenders need to ensure they are lending responsibly and as part of the application process they will complete an assessment of the customer’s ‘credit worthiness’ based on their past history of borrowing and repaying. Potential first-time buyers should check their own credit file with credit reference agencies such as Experian and Equifax to ensure it’s accurate, as incorrect negative credit history could see them being declined for a mortgage.
Ensuring all credit payments are kept up to date is key to improving borrowers’ chances of being accepted for a mortgage. Lenders may also look more favourably on customers who have established a regular saving pattern as it shows they can budget for their mortgage repayments. Customers should also ensure they are registered to vote with their local council as not being on the electoral roll can make it difficult for them to get credit.
Existing relationships with banks and building societies can also be very important in helping first-time buyers getting accepted for a mortgage as lenders will have first hand experience of how the customer operates existing accounts with them. Many lenders, including Nationwide, have deals specifically aimed at existing customers that could offer more favourable rates and terms.
Affordability remains a key aspect of whether a borrower will be accepted for a mortgage or not. Lenders need to be sure that a borrower can afford the mortgage not only at present, when the base rate is just 0.50%, but also in the future if rates start to rise.
If first-time buyers ensure they keep their financial house in order they will have fewer hurdles to cross before moving into their first home.
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