Are we about to see the return of 95% mortgages?
The Prime Minister has announced his desire for the reintroduction of 95% mortgages for first-time buyers, turning “generation rent into generation buy” by increasing the availability of mortgages for first-time buyers.
Currently in the mortgage market there are very few 90% mortgages available, with the majority of lenders only offering mortgage products starting at 85% Loan To Value (LTV).
Boris Johnson laid out his plans In his speech to the virtual Conservative Party conference last week, where he said:
“We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 per cent of the value of the home – vastly reducing the size of the deposit. We will help turn generation rent into generation buy.”
The Prime Minister has asked ministers to develop plans to allow an increased number of mortgages to be available with a 5 per cent deposit, helping those potential homeowners who are currently prevented from getting on the ladder by the demand for fifteen or twenty per cent deposits.
First-time buyers have always relied on higher LTV mortgages, however these deals have become increasingly hard to access since the first national lockdown was introduced. According to Moneyfacts, the financial data company, there were 294 two-year fixed mortgages available with a 10 per cent deposit in March 2020. Currently there are only twelve such deals available.
Some lenders, such as Barclays, have pulled their 15 per cent mortgages, due to the volume of applicants they have received. As house prices continue to rise so does the difficulty for first-time buyers to obtain a mortgage. Halifax recently reported that mortgage applications were at a 12-year high and house prices rising at their fastest for four years.
Jeremy Lock, Head of Mortgage Development at Cooper Associates Mortgages, said:
“We welcome further details from the Department of Housing in due course and any such proposal would certainly help those first-time buyers who are frustrated by the current state of the mortgage market. Any stimulus introduced which promotes growth for the wider economy has to be viewed positively.
It is not yet clear how this scheme would work, and introducing a scheme offering 95% lending when no lender is currently offering 95% products and the vast majority are not even offering 90% products will not be without its challenges! It seems likely the government would essentially be underwriting the risk of mortgage borrowers with small deposits. By combining this guarantee with a longer term mortgage it may permit lenders to expand their affordability criteria further for first-time buyers, thus increasing the flow of lending.
However, lenders will understandably be keen to ensure the affordability checks and stress tests introduced after the last financial crisis remain. All lenders have a duty to lend in a responsible manner and consider the affordability of the mortgage loan in the long term.
At Cooper Associates Mortgages we are continuing to assist first-time buyers realise their dream of getting on the housing ladder. As a whole of market broker, our advisers are aware which lenders are more sympathetic to applications from first-time buyers, as well as the other options available, such as Shared Ownership, which provides another route to home ownership.
The mortgage market is incredibly fast moving, with changes occurring on a daily basis. We would advise anyone who is considering taking out a mortgage, or remortgaging, in the next six months to speak with one of our mortgage advisers. We can talk through the current situation and provide advice on the best course of action to take.”
Cooper Associates Mortgages is a whole of market broker, which means we have access to a wide panel of lenders, enabling us to find the mortgage which is right for you. Our mortgage advisers are on hand to guide you throughout the mortgage or remortgage process and we are able to offer advice through telephone and video calls.
We would be pleased to assist anyone who requires advice at this time. To find out more call 01823 273880 or email [email protected] and one of our advisers will contact you to arrange a telephone or video call appointment at a time to suit you.
