Fears surface for first-time buyers as lenders pull low-deposit

Experts are worried that many first-time buyers may soon be priced out of the housing market completely as more lenders pull low-deposit mortgages from the shelves.

There are now just 51 deals for buyers with a 10 per cent deposit to choose from after First Direct followed parent company HSBC in temporarily pulling its 90 per cent loan-to-value deals last week.

This leaves just a handful of lenders left offering these mortgages, dealing a blow to first-time buyers who typically have smaller deposits and are finding their savings’ purchase power eroded by rising house prices.

Just a handful of lenders are still offering these mortgages, dealing a blow to first-time buyers

Just a handful of lenders are still offering these mortgages, dealing a blow to first-time buyers

 Just a handful of lenders are still offering these mortgages, dealing a blow to first-time buyers

Many of the remaining lenders offering these deals are smaller building societies which may restrict lending by buyer type, rate type, property type or even location.

It comes as a blow to many movers across the country hoping to benefit from the Chancellor’s recent stamp duty cut which sees no tax paid up to £500,000 on house purchases.

Lenders are blaming reduced staffing levels for the decision to cut these deals, which are higher risk and typically take more time to underwrite.

Earlier this week HSBC said that a significant uptick in new borrower enquiries meant that property purchases would be put at risk if the deals remained available.

A First Direct spokesman told This is Money that the Chancellor’s stamp duty holiday has lead to a surge in applications which the lender is unable to service. 

How will this affect first-time buyers?

First-time buyers will have already seen their savings’ purchase power diminishing as a surge in new buyers has pushed house prices to record highs

Costly: The average cost of a home in Britain has risen to £224,123, according to Nationwide

Costly: The average cost of a home in Britain has risen to £224,123, according to Nationwide

Costly: The average cost of a home in Britain has risen to £224,123, according to Nationwide

And for those who are able to secure a low-deposit mortgage it’s getting more expensive to borrow.

The crunch at the lower end of the loan-to-value scale, possibly coupled with lenders’ uneasiness about taking on too many risky customers, has seen rates rise for those at the bottom end of the market.  

Lenders are also more discerning on who they lend to. Nationwide, the only ‘big six’ lender to still offer these deals, says that borrowers are now subject to ‘enhanced criteria’ when applying, for example.

This means that not only are homes more expensive to buy, but securing finance may be difficult, expensive, and subject to more checks than before lockdown. 

Which lenders are still offering deals? 

There are now just 51 deals available from 10 lenders, down from 772 before lockdown was implemented, according to finance experts Moneyfacts.

A full list of all the deals still available can be found at the bottom of this article. You can use our mortgage finder tool to stay up to date as new deals are introduced or existing ones are taken away. 

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘Would-be borrowers may now be forced into a product such as a seven or 10-year fix, or situation, such as parental-assisted loans, which may satisfy the short-term goal but have longer-term implications. 

‘The timing is a real shame given the stamp duty holiday, which could result in a saving of up to £15,000, and is only available until the beginning of April. If those with modest deposits can’t access the mortgages they need, they will miss out on the tax break, which is ironic when you consider that first-time buyers are those that can least afford to do so.’

How many 90 per cent loan-to-value mortgages are left? 
Provider Mortgage Type Rate %
Cumberland BS Discounted Variable Rate 2.57
Teachers BS Discounted Variable Rate 2.64
Cumberland BS Discounted Variable Rate 2.67
Cumberland BS Fixed 2.72
Penrith BS Discounted Variable Rate 2.75
Penrith BS Discounted Variable Rate 2.75
Teachers BS Discounted Variable Rate 2.84
Penrith BS Discounted Variable Rate 2.95
Penrith BS Fixed 2.99
Cumberland BS Discounted Variable Rate 3.1
Cumberland BS Fixed 3.14
Scottish BS Fixed 3.19
Scottish BS Fixed 3.19
Nationwide BS Fixed 3.24
Nationwide BS Fixed 3.24
Nationwide BS Fixed 3.24
Nationwide BS Fixed 3.24
Cumberland BS Fixed 3.25
Furness BS Fixed 3.29
Virgin Money Fixed 3.29
Nationwide BS Tracker 3.34
Nationwide BS Tracker 3.34
Darlington BS Fixed 3.39
Virgin Money Fixed 3.39
Virgin Money Fixed 3.39
Furness BS Fixed 3.49
Nationwide BS Fixed 3.49
Nationwide BS Fixed 3.49
Nationwide BS Fixed 3.49
Nationwide BS Fixed 3.49
Platform Fixed 3.49
Virgin Money Fixed 3.49
Nationwide BS Tracker 3.59
Nationwide BS Tracker 3.59
Cumberland BS Fixed 3.64
Cumberland BS Fixed 3.67
Platform Fixed 3.69
Teachers BS Fixed 3.69
Teachers BS Fixed 3.74
Platform Fixed 3.79
Platform Fixed 3.79
Cumberland BS Fixed 3.84
Teachers BS Fixed 3.89
Teachers BS Fixed 3.94
Platform Fixed 3.99
Platform Fixed 3.99
Al Rayan Bank Fixed 4.49
Al Rayan Bank Fixed 4.49
Al Rayan Bank Fixed 4.79
Al Rayan Bank Fixed 4.79
Source: Moneyfacts (4 September 2020)    
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