The market for first-time buyers has improved, with more products available now than a year ago. Here’s what you need to know…

First-time buyers had a tough time last year. When the property market reopened after the first lockdown, pent-up demand led to a vast number of people trying to move house, and lenders were inundated with mortgage applications. They were also juggling the unexpected and sudden pressures of staff working from home.

To cope with the vast volume of applications, some lenders withdrew certain mortgage products or changed their criteria. ‘First time buyers bore the brunt of criteria changes which were introduced to fend off the number of applications once the market opened up in the summer of 2020,’ says MB Associates’ Sales Manager Phil Leivesley. ‘These changes, which were made to maintain capacity, included lenders tightening their Loan To Income caps for those borrowing with a 15 per cent deposit or lower. This meant that a number of borrowers were capped at 4.5 times their incomes.’

Fortunately, the market has opened up again for first-time buyers. ‘We’re starting to see lenders now unwind these changes,’ says Phil. ‘There has been a return to a more typical 4.75 times income which will allow many first-time borrowers to boost their borrowing capacity.’

Greater affordability

Mortgage affordability for first-time buyers has improved by 20 per cent according to Mortgage Broker Tools’ index. Affordability reached its highest level this year in September as the average loan size increased by nearly ten per cent. A spokesperson for Mortgage Broker Tools says this was mainly driven by improved options for first-time buyers. It reports that the average loan size for first-time buyers was £276,060 in September, increased from £230,555 in January.

While this is clearly good news for anyone hoping to get onto the property ladder, it’s also worth noting that mortgage rates have recently increased. A number of major lenders have withdrawn certain loans and replaced them with new deals at higher rates. However, rates are still relatively low so you can still get a good deal as a first-time buyer.

Get your paperwork ready

If you’re a prospective first-time buyer, our advice is to seek advice from a reputable mortgage broker and get your paperwork ready as soon as possible. That way, if you decide to go ahead with a mortgage application, you’ll have everything you need at your fingertips.

You’ll need to have three months’ worth of payslips and a P60 if you’re employed, as well as a utility bill with your address and your passport.

If you’re self-employed, you’ll need two or three years of audited accounts, two years of your tax computation from your accountant and three months of worth of bank statements.

You’ll typically need a minimum deposit of ten per cent of the purchase price, but if you can afford 15 per cent, you’ll get a better interest rate. The higher the deposit, the more competitive deal. There are some 95 per cent mortgages available but these come with some degree of risk, as if the value of your home drops, you could be paying interest on a loan greater than the value of your property.

More Information If you need advice on getting a mortgage, please contact us and one of our advisers will be glad to help.

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