Are mortgages for first time buyers still out there?

Compared to the mortgage market in 2007 figures in March 2010 show that there are relatively no mortgages for first time buyers.  Gone are the days of 100% or even 125% mortgage deals and since the credit crunch first time buyers have had to take a different approach if they want to get on the property ladder.

Sue Anderson, of the Council of Mortgage Lenders, said: “Mortgage availability has tightened markedly since the credit crunch, largely as a result of the rationing effect arising from the limited availability of funds to lenders. The effect on first-time buyers has been to require them to build higher deposits than in the past before they can enter the market. Even though the situation has now eased a little, with a slightly wider array of mortgages available, the prospects for first-time buyers are likely to remain much more challenging than before the credit crisis.”

The 95% LTV mortgage is still around but deals are so few and far between there is little in the way of competition to drive rates down or offer other incentives to the buyer.

Saving hard seems to be the key as the mortgage deals offer better value when a 10-20% deposit is available. For some this can close the door on any hopes of getting on the ladder, but there doesn’t seem to be any indication the market is about to change. Frustratingly for first time buyers there are quite a few 80% mortgage deals currently on the market offering good choice and value.

However there are two further factors which can cause great issues for the first time buyer looking for a mortgage.

Credit score – Lenders are not going to lend so easily or restrict their lending if the applicants credit rating is damaged, or limited.  The poorer the credit rating the higher  the rate is likely to be.  Not being careless with personal finances is obvious but taking out a credit card, using it and paying it off each month will increase the credit score.

Low income – raising the deposit is one thing but having a low single income will restrict the amount the lender will agree to.  If the first time buyer earns £23,000, has a deposit of £30,000 for a £150,000 property the lender is unlikely to lend 5.6 times the salary required to buy the property.

Today the only mortgages for first time buyers not on high salaries are a form of guarantor mortgage (or lend a hand mortgage) where a close friend or member of the family assists, or purchasing the house with a partner or friend so that the incomes can be joined.