High loan-to-value mortgages dry up for first-time buyers
With the number of low-deposit mortgages available to first-time buyers dwindling, analysts fear the knock-on effect will cause a slowdown in the property market.
In the wake of the Brexit vote, lenders have been seemingly optimistic regarding the health of the UK’s housing market. With low mortgage rates, lenders are reporting an increase in borrowing to those looking at moving to a new house – but while all signs seem positive on the surface, beneath the cheerful veneer there is a growing concern for those who are looking to buy their first home.
In June 2016, the average price of a first home hit a historic high of £161,912, forcing first-time buyers to borrow a greater percentage of the total price. While this has never been a huge issue for the majority of potential buyers; property selling experts have expressed apprehension over the reduction in available mortgages for those with small deposits.
Lenders argue that the move is to prevent buyers falling into negative equity – but it ultimately lowers the number of potential homeowners joining the market, as the capital they have earmarked for a deposit is no longer enough.
“This will exacerbate fears that homeownership levels are in long-term decline because of the challenges first time buyers face in accessing the market,” said Simon Crone, commercial director at AmTrust.
“Failure to support first time buyers will impact the wider housing market by preventing people from moving up the housing ladder.”
On the other hand, those who already own a home but are planning to move, as well as those with a larger available deposit, are enjoying interest rates at a record low – but industry experts believe that this will not be enough to encourage a greater level of activity within the market.
The new data released by Moneyfacts and Amtrust also suggests that government schemes such as Help-to-Buy are failing to negate the downward trend of low deposit mortgages, making life difficult for those who are looking to sell their home fast but are finding themselves experiencing fewer and fewer viewings.
Of course, vendors can also use property buying companies who will buy any home for cash at very competitive prices, with the added benefit of a fast sale without having to navigate the traditional route of estate agencies and their accompanying fees.