First Time Buyer Mortgages – Options improving with improved 95% mortgage rates & more choice of schemes
Research recently conducted by Santander suggests that almost a quarter of first time buyers believe that it will take them at least 5 years before they are able to save sufficient deposit to buy a home.
Lenders have been slow off the mark since the credit crunch to help first time buyers but they are now starting to respond to this and many are coming up with first time buyer savings products or offering incentives for existing customers to enable them to have access to 95% mortgage schemes.
It feels like we have regressed 40 years in the mortgage market and Building Societies have gone back to their roots – To assist their members (savers) with mortgage funding. Nationwide Building Society is the latest to launch their ‘save to buy’ mortgage which offers first time buyers an account to help them save regularly towards a deposit to allow them to apply for a 95% mortgage. However, to be eligible to apply for a 95% mortgage under the scheme, you must have been saving with the Society for between 6 months and 3 years and the mortgage rates on offer are not that competitive.
A further drawback of this scheme is that even after saving the deposit and being a member for the required amount of time, there are no guarantees provided by the lender that a first time buyer will be agreed for a mortgage with just 5% deposit – A high credit score will still be required. We would therefore recommend an approach of not only saving a regular amount on a monthly basis but using a credit card for day to day expenditure (food, petrol etc) and then clearing this in full by direct debit every month as this will help build an excellent credit rating whilst saving for deposit.
Skipton Building Society has also improved it’s product offering at 95% with a 2 year fixed rate of 5.99% with no completion fee and just a £195 application fee. This is good news for a first time buyer as it is keeping the upfront costs low and loan to value as near to 95% as possible.
There is more choice with 10% deposit and bizarrely Northern Rock, one of the previous fall guys over high loan to value lending have just launched a 90% mortgage product. Click here to search all the mortgages currently available on the market.
One major concern we have over bank / building society exclusive savings account / current account schemes is that a first time buyer is not receiving a fully advised service. Arranging a mortgage (especially as a first time buyer) is the biggest financial decision that you have to make, yet the majority of these Banks & Building Societies are unable to offer a full advice & recommendation service. Instead, they can only provide information on the different products that they offer (not whole of market) and expect the first time buyer to choose the right product for their circumstances.