The property market may be booming for some but new research reveals first-time buyers are getting left behind.
Prospective buyers looking to get onto the housing ladder will have already seen their savings’ purchase power diminishing as a surge in new buyers has pushed house prices to record highs.
On top of this, mortgage lenders were quick to pull high loan-to-value mortgages from the shelves in the wake of lockdown leaving just a handful of deals for borrowers without a large deposit to choose from.
As a result nearly half of all potential first-time buyers have had to delay their plans by up to a year, new research from challenger bank Aldermore found.
Nearly half of prospective first-time buyers have delayed buying a home during lockdown
This is Money recently revealed that a 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.
This is coupled with the financial hardships lockdown has already visited on many across the country.
This means that homes are more expensive, finding a mortgage is more difficult, and rates are higher for the deals that are left.
As a result one in two first-time buyers is now worried about their financial security and some 45 per cent say they need to raise a bigger deposit as providers will not lend as much as before lockdown.
Many have also experienced failed attempts to buy a home due to the lockdown period, with one in six having a property sale fall through and one in five saying they pulled out of buying due to lockdown.
Jon Cooper, head of mortgage distribution at Aldermore, said: ‘First-time buyers experience strong financial and emotional challenges at the best of times as they go through the home buying journey, but it appears now this has been heightened by coronavirus.
Costly: The average cost of a home in Britain has risen to £224,123, according to Nationwide
‘The wider economic recovery will be the real determining factor for how the first time buyer market performs this year.
‘Buyers need job security if they are to feel confident in taking the plunge in what is one of the biggest financial investments of their lives.’
First-time buyers are running out of mortgages to choose from
At the start of the month there were just 51 deals available to those with a 10 per cent deposit, down from 772 before lockdown was implemented, according to finance experts Moneyfacts.
Before lockdown there was even a thriving mortgage market for borrowers with just a 5 per cent deposit, but these deals have all but vanished save for a few specialist options.
Lenders have mostly blamed staffing shortages forcing them to rein in new mortgage lending and focus on existing customers..
Lower deposit mortgages usually take more work to underwrite, as they present a higher risk to the lender.
Best mortgage rates and how to find them with This is Money’s help
This is Money has partnered with L&C Mortgages, a firm of independent mortgage brokers who specialise in finding the best mortgage rates and the right deal for you.
To check for the best mortgage deal and speak to an adviser, click here.
Or you can fill in your details online to find out the best mortgage rates for you.
Lenders will have more of a handle on their staffing issues now, but they are still working at a much lower capacity than they were at the start of the year.
As a result, if staffing problems at banks and building societies lead to deals being cut, it’s high loan-to-value deals that go first.
It’s likely lenders are also taking a more cautious approach to who they lend to as they watch to see how the economy fares and, crucially, what happens to house prices over the next 12 months given the prospect of a second lockdown and the furlough scheme set to end at the end of the month.