Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.
Lenders Offer More High LTV Mortgages for First-Time Buyers
Lenders have expanded their range of high loan-to-value (LTV) mortgages for first-time buyers, but this comes with increased risk of debt for those taking them on. Leeds Building Society, Metro Bank, and Lloyds are among the lenders now offering low-to-no-deposit options for first-time buyers.
Leeds Building Society’s Start Mortgage is available to first-time buyers on a five-year fixed rate of 5.65%. Metro Bank has launched a joint borrower sole proprietor (JBSP) mortgage, allowing first-time buyers to borrow up to 100% LTV with the support of an immediate family member. In May, Lloyds introduced a minimum £5,000 deposit option, which is equivalent to just over 98% LTV.
Debt Reduction Strategies Encouraged
Sprive, an app that helps borrowers with overpayments, has highlighted the importance for first-time buyers to have a strategy in place to reduce their debt from the outset. The company noted that while smaller deposits can help buyers get on the property ladder sooner, they also mean borrowing more and starting with very little equity. Sprive emphasised that even small overpayments from day one can reduce the mortgage term and save money on interest over the life of the loan.
House Prices and Savings Challenges
Despite the increased creativity in mortgage products, house prices continue to rise. In June, house prices rose by 0.2%, with the average property value reaching £299,330. According to MoneyBox, house price inflation has resulted in the average first-time buyer needing to save for an additional nine months to afford an averagely priced UK home.
MoneyBox’s research found that average monthly savings contributions from first-time buyers have increased from £344 in 2023 to £475. However, many buyers still feel they are falling behind. In a survey of 2,000 aspiring first-time buyers, 71% said their savings journey will now take longer than originally planned, with the average expected wait for homeownership rising to four-and-a-half years, up from 4.2 years in 2023.
Source: Mortgage Solutions