Last year presented some challenges for first-time buyers but mortgage deals are likely to improve in the second quarter of this year. Here’s why now could be a good time to start looking into buying your first property…

Let’s be honest. First-time buyers had a tough time of it last year after many lenders withdrew their 90 per cent mortgage deals. When the pandemic took hold, lenders were grappling with the combined challenges of staff working from home, enquiries about mortgage payment holidays and increased demand for mortgages. Pent-up demand after the market was closed during the first lockdown, swiftly followed by the introduction of the stamp duty holiday in July, meant that lenders were in danger of becoming overwhelmed.

To manage increased demand, they tightened their criteria and withdrew mortgage products with a deposit of less than 20 per cent of the purchase price. This was merely to help them cope with customer demand rather than lenders taking a cautious view of the market, but it certainly didn’t help first-time buyers.

Unfortunately, many first-time buyers who had saved up a ten per cent deposit in need of a 90 per cent mortgage saw their buying hopes dashed. They either had to save more, borrow from parents or hold fire and keep saving.

Climbing house prices

In addition, house prices climbed, and the average size of a first-time buyer deposit increased by almost £11,000 to over £57,000. Not surprisingly, the number of first-time buyers fell by 13 per cent year-on-year.

In the latter part of 2020, some lenders reintroduced 90 per cent mortgages but the interest rates were not particularly competitive. Some buyers concluded it was in their best interests to wait a bit longer and hope to get a mortgage with a lower interest rate. This could save them a considerable sum in the long-term.

Fortunately, things are about to improve for first-time buyers. With the stamp duty holiday coming to an end on 31 March, the busy property market is expected to calm down. While we’re not expecting a market crash, it looks like buyer demand will ease off a bit after the stamp duty holiday.

‘Reduced demand will allow lenders to catch up with their backlog of applications,’ says MBA’s Sales Manager Phil Leivesley. ‘Once this happens we’re likely to see the larger lenders who have yet to return to the 90 per cent loan-to-value market launch new products available to borrowers with a ten per cent deposit.’

A more competitive market

Phil adds: ‘With a full range of mortgage lenders on board with this, we’re likely to see the 90 per cent loan to value market become competitive once again. Lenders need to lend, but they also want to preserve their service levels to avoid demand exceeding supply.’

At the time of writing, several key lenders have reduced their rates on 90 per cent mortgages including Nationwide, Barclays and Metro Bank. Once competition among lenders increases, rates could come down further.

So if you’re hoping to get on the property ladder this year, you’ll want to keep an eye on the housing market in the next few months. At MB Associates, we work with a vast range of lenders so feel free to contact us now if you’re hoping to buy in the next few months.

More information

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