Demand from first-time buyers is still going strong. The Help-to-Buy mortgage guarantee scheme may have come to an end, but that hasn’t dampened activity among first-time buyers.
Instead, demand seems to be escalating, with figures from Yorkshire Building Society revealing a definite spike for high loan-to-value (LTV) mortgages in January, as increasing numbers sought to get on the housing ladder. The mutual saw demand for 95% LTV mortgages rise by a whopping 91% year-on-year in January, suggesting that more were able to pull together a 5% deposit to take that first step.
This follows increased demand across 2016 as a whole, with the mutual increasing its 95% LTV lending by more than 50% compared with 2015, so there’s no sign of the market losing its momentum. “More and more first-time buyers are trying to get their first step on to the property ladder so the demand for 95% LTV mortgages shows no sign of slowing down,” commented Charles Mungroo at Yorkshire Building Society. “It’s positive to see that borrowers realise there are still options available across the market to those with smaller deposits, despite the disappearance of the Help to Buy mortgage guarantee scheme.”
The figures follow our own research which revealed that the high-LTV market hasn’t disappeared as a result of the withdrawal of Government support – indeed, the number of 95% LTV mortgages available has risen by 38 on a monthly basis to stand at 248, as providers relaunched their 95% LTV deals as standard rather than Help to Buy offerings. Source: Moneyfacts.co.uk (published 14 February)
The following are some guidelines and tips for First Time Buyers to help them with the process:
How much deposit do I need to buy a house? Before starting to look at properties, you need to start saving for a deposit. Generally, you need to try to save at least 5% of the cost of the home you would like, so if you want to buy a home costing £150,000, you’ll need to save at least £7,500. Saving more than 5% will make it easier for you to apply for a wider range of cheaper mortgages.
Make sure you can afford your monthly repayments As a first-time home buyer, the most important thing to bear in mind is whether you can really afford to take this step. It’s wise to put together a budget before you start looking for a property. There are now strict checks when you apply for a mortgage. Lenders will check that you can afford the mortgage and also ‘stress test’ your ability to make your payments if interest rates were to rise or if your circumstances changed, such as possible redundancy or having children. As part of the mortgage application process you will need to show the lender evidence of any outgoings, and prove your income.
Budget for the other costs of buying a home Apart from your monthly mortgage payments, there are other costs associated with buying a home. These include:
• Mortgage arrangement and valuation & broker fees
• Stamp Duty (or Land and Buildings Transaction Tax in Scotland)
• Solicitor’s fee
• Removal costs, Initial furnishing and decorating costs
Affordable home buyer schemes to get you on to the property ladder There are a number of government-backed schemes aimed at giving home buyers – and movers too – a helping hand onto the property ladder. If you are able to use one of these schemes, lenders will still ensure that you can afford to pay your mortgage.
Finding a mortgage and the application process There are many different mortgage deals to pick from, so choosing the right one for you can be tricky. It can depend on a number of factors, so it’s a good idea to do some research and talk to experts such as mortgage brokers who can assist you with ensuring that your credit status and circumstances are all in readiness for submitting an application to a lender.
Whichever mortgage you apply for, your lender will want to know that you can make payments if interest rates rise or your financial circumstances change. You will need to prove your income, and show the lender evidence of any outgoings, including debts, household bills and other living costs such as clothing, childcare and travel costs. To prove your income, you may have to produce payslips and bank statements. If you are self-employed you could be asked for tax returns and business accounts prepared by an accountant.
Joanne Osborne is Director of Scarlett Financial Services
Information Source: The Money Advice Service website