First-time buyers struggle to get mortgages with a 10% deposit

First-time buyers who have been saving for a 10% house deposit will have seen the number of mortgage deals available to them fall by 40 overnight, with just 75 deals now available at a 90% loan-to-value (LTV).

As well as the number of 90% LTV deals falling, the number of deals available at a 95% LTV has also dropped by almost half, falling from 33 available yesterday to just 16 deals on the market today.

Nationwide Building Society’s decision to withdraw its 90% and 95% deals from the market will come as a blow for first-time buyers, who over the last few weeks will have seen an increasing number of lenders withdrawing their high LTV deals from the market, with popular providers such as Virgin Money and Accord Mortgages pulling 90% and 95% LTV deals.

Not only are first-time buyers seeing the number of mortgage options available to them on a 5% or 10% house deposit fall dramatically, but with savings rate being slashed at the same time, it is becoming increasingly harder for them to save for the 15% deposit needed for a deal at 85% LTV. For first-time buyers who are able to save for a 15% deposit, there are currently 341 deals available on an 85% LTV.

In addition to this, last November the Government’s popular Help to Buy ISA, which offered a 25% bonus for savers, was withdrawn from the market. This has left first-time buyers saving for a house deposit and wanting to get a Government bonus on their savings with only the option of a Lifetime ISA, for which there are just six deals available to savers, with the highest rate standing at 1.25% AER.

First-time buyers who have been able to save for a 10% or 5% deposit and who are unable to save further should consider speaking to a mortgage broker to discuss their options.

Eleanor Williams, finance expert at Moneyfactscompare.co.uk, said: “It may be disappointing for prospective borrowers to see more contraction again in the higher LTV mortgage market, but this arena has been significantly impacted by the Coronavirus pandemic, and these are unprecedented and uncertain times for borrowers and lenders alike. As well as operational difficulties and high levels of pent-up demand unleashing as the property market re-opened, there is also concern around the possibility of negative equity, as there is the worry that potentially property prices may drop in the months to come.

“If borrowers are looking to explore their purchase or remortgage options with only a small deposit or low level of equity, they would be wise to seek independent financial advice to go through their options, as what is available and the criteria and requirements of providers is a very fluid landscape at the moment.”