FIRST-TIME buyers could find it easier to jump onto the property ladder as more mortgages hit the market requiring a smaller deposit.
Two major lenders, NatWest and Lloyds, have brought back home loans which need a deposit of just 10%.
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Lenders pulled many of these low-deposit mortgages which are favoured by first-time buyers when the coronavirus crisis hit.
Uncertainty in the housing market and the wider economy prompted them to reduce lending because it wad too risky.
They have slowly made a come back and the property market has recovered too after a stamp duty holiday boosted sales.
NatWest has announced that it will offer four new mortgage products for buyers looking to borrow 90% of a home’s value.
How much deposit do I need?
THE basic rule is the bigger your deposit the better the rate you’ll get and the smaller your monthly repayments will be, but not everyone can wait that long.
A decade ago, borrowers were able to take advantage of lots offers that meant they didn’t need to stump up any money before getting their mortgage.
Nowadays, you’ll need a deposit that’s at least 10% of the property value before you can take out a mortgage.
That means you’ll have to borrow the rest from a bank or building society – the chunk of cash you borrow compared to the deposit is called the loan to value (LTV).
So if you put down 10%, you’ll take out a mortgage for 90% LTV, or 85% LTV if you’ve got a 15% deposit.
A few 0% mortgages have also slipped onto the market, which make it look like you don’t need a deposit at all.
This is where the buyer borrows 100% of the mortgage without having to stump any of your own funds upfront, but most of them rely on you getting some sort of financial assistance from your family.
The deals will be available from tomorrow (December 16) from NatWest and Royal Bank of Scotland, which are both owned by NatWest Group.
The mortgages will be for first-time buyers and existing homeowners who are moving house, with rates that can be fixed for two or five years.
We’ve asked NatWest what the interest rates will be and will update when we hear back.
Lloyds last week brought back its 10% deposit mortgages which are available through Lloyds Bank and Halifax.
But they will have stricter criteria which means they may not be available to all first-time buyers.
They can’t be used for buying new build homes or with schemes designed to help first-time buyers, like Help to Buy.
The maximum buyers can borrow is £500,000 and existing homeowners can’t get this one.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
Lloyds has also brought back its ‘Lend a hand’ mortgage which requires no deposit and instead uses savings from family.
TSB and Virgin Money have also brought back 10% deposit mortgages in recent weeks.
Mortgages requiring a 10% deposit plunged to a low of 51 by the end of September, according to Moneyfacts.
By the start of the month there were 81, a sign that lenders were more willing to help out first-time buyers.
But the number of starter mortgaqes on offer has not yet returned to pre-pandemic levels – in March there were 779.
As well as stricter lending criteria the return of 90% mortgages also come with higher rates.
The average rate for a two-year fixed rate mortgage requiring a 10% deposit is 3.79%, data from Moneyfacts shows, the highest since February 2015.
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A new mortgage aimed at helping first-time buyers onto the property ladder lets up to six family members or friends apply for a loan.
Some banks have launched “flash sales” of low-deposit mortgages that have been as “rate as Glastonbury tickets”.
Check out our guide to buying your first home, including how much you can borrow and the help available.
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This post first appeared on thesun.co.uk
