For the first time in history, the average house price is now more than £250,000 meaning that in combination with a cautious lending market, it's no mean feat to get onto the property ladder. In many cases, (23%) The Bank of Mum and Dad (BoMaD) is giving a helping hand to First Time Buyers and with prices so high compared to earnings, unsurprisingly Boris’ tease of 95% mortgages has piqued interest.
Whilst in principle, it would be great for purchasing a property to become far more accessible to the masses, it is unlikely for the time being that lenders will rush back to high Loan To Value (LTV) mortgages given the turbulent year we've had to date. You only have to look back to the Financial Crisis in 2008 to see the negative impact of lenders overstretching and over-lending themselves on high LTVs. This time, I believe a loosening in mortgage regulation won’t happen as freely as it has in the past.
Where does this leave First Time Buyers?
If you are a FTB you may have to wait longer to get onto the property ladder or need to reassess your budget given most lenders are currently only offering a maximum of 80-85% LTV. On a property of £300,000, a 5% deposit of £15,000 might have felt achievable for FTB's but circumstances now mean that they need to find a deposit of 15%, leaving them £30,000 short.
Often, the greatest frustration for First Time Buyers is the struggle to save a deposit whilst paying high rent that may even be more expensive that the mortgage payment. As a Financial Planner who concentrates on mortgage advice, it might be the expectation that I would always say renting is a waste of money and the best, only option people should look into is buying a property as soon as possible. However, this is far from the case and there are many reasons as to why renting isn’t wasting money.
If you are a First Time Buyer weighing up all your options and feel ready to start planning for your first mortgage, do get in touch as we'd be so happy to help you with advice and guidance and let you know which products are available to suit your financial needs.