by Mark Johnston
For those first time buyers who have a modest deposit, there is some good news as banks and building societies are now returning to the market and catering for their needs. The number of first time buyers in the UK has nearly trebled over the past few years and the number of products on offer has more than doubled. In 2009, according to MoneyFacts.co.uk there were only about 62 products on offer and now there appear to be more than 183 mortgage offers.
There should be no surprise that mortgage offers requiring little or no deposits have been all but removed from the market as lenders become more risk averse and are being asked to ensure there is sufficient proof of income.
There have been some reassuring signs that banks and building societies are re-entering the market and catering for first time buyers who can prove that they can cover their liabilities. There are, according to research and reports, more than 31 different types of loans available for those who only have a 5 per cent deposit.
Before the crisis hit in 2008, July 2007 saw the deals on offer up near 1,097. This was just the number of deals available to borrowers with a 95 per cent Loan to Value ratio, or a 5 per cent deposit in other words. In July 2009, the number of deals available to borrowers who only had a 5 per cent deposit was 6. So you can see that statistically the number of offers to new home owners has increased year on year. Some positive news to those borrowers hoping to get a foot on the housing ladder.
The BoE’s Monetary Policy Committee has maintained the low rate of 0.5% keeping this status quo for the last two years has been bad news for some groups and good news for others, first time buyers are amongst the winners this time.
A recent survey, commissioned by an insurer, revealed that 75% of Ministers of Parliament (MPs) feel that people, with stable incomes and can afford repayments should be helped onto the property ladder. This financial assistance should be provided even when those individuals don’t have the 10-20% deposit required.
Additionally, the same survey revealed that over 83% of MPs feel that their constituents need more support getting into the housing market. In London, it was suggested that this figure is closer to 100% of constituents will need support, a staggering figure.
This is great news for first time buyers, there is now clearly a light at the end of the tunnel, banks and building societies are also now responding. With the deposit remaining the biggest barrier to homeownership, it’s pleasing news to see a market reaction. The average deposit has risen from 10% to 21% in recent years but currently there are over 200 mortgage deals that will lend 90% of property value, last year there were less than 150. These LTV deals represent only a fraction of the deals that were available before the Credit Crunch began in 2008.
The increase in the number of offers out in the market available to first time buyrs has had a positive effect on the rates they charge. Rates in June 2009 were around the 5.63 per cent mark but now, banks and other lenders are looking to apply a 5.22 per cent rate. Great news.
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