It can't be denied that it's a struggle to get on the housing ladder. Building up a large enough deposit is the first – and perhaps biggest – hurdle, but after that there's future affordability to consider, getting a suitable rate and of course, finding a mortgage in the first place.
Most first-time buyers (FTBs) will need a higher loan-to-value (LTV) mortgage for the simple reason that they tend to have smaller deposits than those further up the ladder, and in the past that in itself would have posed a problem – but not anymore. There are now more high-LTV mortgages available than there have been for years, and that's helping more FTBs realise their dream of homeownership.
Moneyfacts figures have revealed a whopping 242% rise in the number of 95% LTV mortgages available since October last year, undeniably led by the Government's Help to Buy mortgage guarantee scheme. The scheme, which has encouraged lenders to offer mortgages to borrowers with just a 5% deposit, has helped boost competition in the sector and is having the desired effect – in October there were just 43 mortgages available at this level, but now there are 147.
This 104-product rise shows how much of an impact the scheme has had, but interestingly, there are only 50 mortgages currently on offer from Help to Buy participants. This would indicate that the scheme has helped, but hasn't been the driving force behind, the growth in the sector, with competition having increased substantially elsewhere.
It's great news for FTBs as it gives them more choice in who they do business with, and shows that lenders are increasingly willing to offer mortgages to those with smaller deposits.
Figures elsewhere in the industry back up Moneyfacts' findings. A report from the Bank of England (BoE) has revealed a sharp increase in the value of FTB lending over the last year, with a total of £9.4 billion in mortgages being advanced to FTBs in the first three months of the year – a full £3.2 billion, or 52%, higher than the same period in 2013.
Their figures confirm that lending at loan-to-values (LTVs) above 90% has seen a sharp rise too, with the proportion of mortgages at this level accounting for 3.6% of total market share – it may not sound like a lot, but it's almost doubled in the last year and is now the highest figure recorded since 2008.
However, it's not all good news. The FTB market has been affected by new affordability criteria following the Mortgage Market Review (MMR), and it's beginning to have an impact on the level of FTB lending.
The BoE report revealed a slight slowdown in this lending on a quarterly basis, having been at £10.6 billion in the final quarter of the year, while additional figures from the Council of Mortgage Lenders (CML) have shown that lending to first-time buyers only increased by 1% in April compared to March. This is compared to a rise of 11% in home-mover lending and 6% in the remortgage sector, suggesting that the FTB market is feeling the greatest impact of tightening affordability criteria.
However, even an increase of 1% is still a rise – and the level of lending is also a full 37% higher than in April 2013, with 6,600 more FTBs getting the mortgage they need. Overall, then, the future seems to be looking bright for first-time buyers, as an increasing number are finding they're able to get on the ladder.
Of course, MMR changes might be making it slightly more difficult to get your hands on that mortgage, but if you've sufficiently prepared and can prove affordability there should be nothing to hold you back. The fact that there are more mortgages available only adds to the potential, and with house prices only ever rising it could be a great time to get on board.
Check out our range of FTB mortgages to see the increased level of choice for yourself, and then all you've got to do is start planning your dream home.
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