by Mark Johnston
For many first time buyers the chances of getting a foot on the property ladder any time in the near future appears to be slim to none. Buying a home in the current financial climate takes a lot of dedicated saving as first time buyers have to now provide a decent deposit before a lender will even consider them.
Many financial experts believe that a house is the biggest purchase anyone makes and therefore it is important to take it seriously, by saving for a deposit first time buyers show commitment and financial responsibility.
Research has shown that many would be first time buyers are paying rents equal to or in some cases more than they would pay on monthly mortgage repayments. Credit history and large deposits are the main factors keeping many borrowers from making their way on to the property ladder.
According to figures in August 2011 from the Council of Mortgage Lenders (CML) the number of first time buyers is at its highest level in 10 months, crucial to this increase is the rise in the number of higher loan to value (LTV) mortgages now available.
As well as the low deposit mortgages there are also other deals and options designed specifically for first time buyers entering the market at the moment.
These deals come as announcements suggest that housing transactions plummeted by more than 30% in January, from 100,000 in December to just 67,000in January and also figures from the British Bankers Association (BBA) showed that mortgage lending fell to its lowest levels since May 2009.
The Chelsea building society offer a deal at 4.39% 2 year fixed deal with a 90% LTV and a £195 fee. The Yorkshire building society’s deal is a 4.99% 3 year fixed deal also 90% LTV and a fee of £495. The Skipton building society offers 5.99% rate 2 year fixed on 95% LTV with a fee of £195 and the HSBC offers a rate of 5.09% on a 90% LTV with no fees and no early repayment charges.
The Northern bank, which operates in Northern Ireland and does not offer mortgages in any other parts of the UK, has brought back the 100% mortgage. This particular mortgage became extinct in the wake of the credit crisis.
However with house prices more likely to fall than rise, borrowing 100% of the purchase price is extremely risky and before long borrowers could find themselves in negative equity, therefore making it nearly impossible to move or re-mortgage after the deal ends.
Other 100% mortgage deals offered by lenders are usually ‘guarantor’ mortgages; these require parents to underwrite the loan. Although with no security in the job market and no such thing as ‘a job for life’ anymore, it would be up to parents to pay the repayments if the borrower could not, putting huge pressure on family relationships.
Although the housing market will benefit from resurgence in first time buyers, what is not needed is another boom and bust scenario. Responsible lending is required and higher LTV’s but more of 90% level than the 100%.
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