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First Time Buyers Are Thrown A Mortgage Lifeline

05 February 2021

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The UK property market experienced record activity in 2020, as buyers and sellers frantically made deals to progress their next home move. Fuelled by the desire to change their living situation during the pandemic and of course the government’s stamp duty holiday, there were a range of factors incentivising movers.

Unfortunately, not everyone has been able to benefit from the generally positive property market activity in the same way. Some first time buyers who were already struggling to obtain enough of a deposit pre-pandemic were effectively priced out of the market entirely when the impact of the stamp duty holiday caused property prices to rise further out of grasp. Local estate agents in Chelmsford explain that first timers also experienced increasing competition from the buy to let market. Coupled with this, banks were driven by caution and removed many of their 90-95% LTV mortgage products from the market for several months of 2020.

Fewer High LTV Products Available 

A Freedom of Information Act sent to the Financial Conduct Authority revealed that between January to September 2020, there were 52,527 UK mortgage sales using products in the 90-95% LTV range. This was a 37% drop in the average volume of mortgage sales in this band in 2017, 2018 and 2019 which stood at around 74,500. 

What this mortgage crunch meant in real terms to first time buyers is that their deposit rose by an average of £11,000 to a total requirement of £57,000 in cash to secure their starter home. For many, this was simply out of reach and they were squeezed out of the market. But fast forward to February 2021 and there’s light at the end of the tunnel as first time buyers have been thrown a mortgage lifeline. 

Lenders return to market 

Many of the major lenders are optimistic about the year ahead and have relaunched their higher LTV products for first time buyers to take advantage of once again. As a significant player in the market, HSBC has reintroduced 90% LTV mortgages, along with 2-5 year fixed rates and terms of up to 35 years for additional flexibility. As a major lender, it is expected that others will follow HSBC’s lead. 

Santander is also offering two new 90 percent LTV products, fixed for five years at a rate of either 3.6% or 3.79% depending on whether you’re willing to pay the £999 arrangement fee. 

Smaller lenders such as Yorkshire and TSB have also tentatively reintroduced their 90% offerings and approval rates across all lenders are high. 

HSBC’s UK Head of Buying a Home, Michelle Andrew’s explains “We are all seeking a return to normal, although for many it will feel like we may not see that for a while. With us returning to the higher LTV space, hopefully that is a little bit of welcome normality.”

Stamp duty holiday will continue for first time buyers 

Of course, a major advantage that first time buyers have over the rest of the market is stamp duty. Although many UK buyers are waiting to find out if the stamp duty holiday will be extended following the end of March, first time buyers will still pay zero stamp duty on properties worth up to £300,000 and then pay 5% on the portion of the property sale worth between £300,000 to £500,000. 

With the return of these high LTV mortgage products, a possible slowdown in UK price rises and the continued promise of zero stamp duty, the future is looking bright for first time buyers in 2021. If you're a first time buyer looking to get your foot onto the property ladder, Balgores are here to help. In addition to our wide selection of homes, we also have a dedicated mortgage broker (or two!) inside every one of our branches across Essex and Kent. To get in contact with us, find your nearest Balgores branch, use our mortgage calculator or leave us a message on our website!

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