First-time buyers are finding it increasingly difficult to climb onto the housing ladder as mortgage providers restrict products to only buyers with large deposits during the pandemic, a major study has revealed.
The report, published by The Guardian, shows that banks and building societies are removing 90 and 95 per cent mortgages, meaning first-time buyers are having to conjure up an even greater deposit.
The report also reveals that lenders are restricting products for flats and new build properties, as some providers predict a crash. This includes increasing the minimum deposit demand or reducing the maximum loan term to 25 years.
Nationwide, one lender who has introduced these restrictions, said “in periods of uncertainty we tend to see the values of flats fall at a sharper rate than houses” and new-build properties “may fall further than on older properties”.
And despite interest rates reaching historically low levels, interest rates on products for first-time buyers are moving in the opposite direction. For example, one high street lender is offering a rate of 1.74 per cent on 40 per cent products, while the same lender is offering a rate of 3.49 per cent for 10 per cent products.
This is all while house prices rocket to record levels following the introduction of the Chancellor’s Stamp Duty Holiday. According to the latest statistics, house prices increased by 0.9 per cent in September and two per cent in August as buyers rushed to make Stamp Duty Land Tax (SDLT) savings of as much as £15,000.
Commenting on the situation, Chris Sykes, a mortgage broker at Private Finance, said: “The housing market is full of mixed messages at the moment, huge demand for property and rising prices, yet lenders remain, and are increasingly, cautious.
“To achieve low mortgage rates you either need a significant deposit or significant equity in your home – at least 25 per cent and ideally 40 per cent-plus, such is lenders’ fear that prices could fall significantly in the coming months.”
For more residential property support and advice, please get in touch with our expert team today.