IF you’re a first-time buyer then securing a mortgage is the first step onto the housing ladder.
With rates dropping, first-time buyers are now paying a lot less in mortgage repayments than they were a year ago.
According to research from Rightmove, average monthly payments have fallen by £150 since July 2023.
“It’s early days, but the acceleration in mortgage rate drops since the Bank Rate cut means that home-movers are starting to see some tangible affordability improvements,” says Tim Bannister from Rightmove.
“A saving of nearly £150 in monthly outgoings for a first-time buyer compared with last year is significant.”
Adding to the good news, several lenders have announced initiatives aimed at helping first-time buyers.
These include small or no deposit mortgages, higher earnings multiples and more ways families can help get relatives onto the housing ladder.
So, if you’re hoping to buy your first home soon, which lenders should you be considering?
We spoke to the experts to bring you a list of the banks and building societies with a strong track record of helping first-time buyers achieve their property dreams.
If you’ve only got a small savings pot, then Skipton Building Society could be your ticket to homeownership.
Their Track Record mortgage offers you a no-deposit option if you can show you have been paying rent for a year or more.
“They will need to meet affordability requirements of course but it opens up the possibility of borrowing as much as 100% of the property value,” says David Hollingsworth from L&C Mortgages.
It has a five-year fixed rate of 5.29% with no fee.
You can even get a version that will lend you 100% of the value of your home and give you £1,000 cashback – but the rate is higher at 5.44%.
You could then use your savings to cover the additional costs associated with buying a house, from legal fees to stamp duty.
“This is great for those who are finding it difficult to save for a deposit and pay rent but are able to afford the lending they require,” says Raj Bathia, a mortgage advice manager at Habito.
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
Mortgage guarantee scheme – The scheme opens to new 95% mortgages from April 19 2021. Applicants can buy their first home with a 5% deposit, it’s eligible for homes up to £600,000.
“Rates on these products are higher, but it does allow people to get onto the ladder and shift their rent payments to mortgages.”
“Skipton can also allow up to four people on the mortgage, so allows mixed households to maximise their income to get the lending required.”
Another option if you only have a small deposit is Yorkshire Building Society’s £5k deposit mortgage.
“It does what it says on the tin,” says Hollingworth.
“It only requires a deposit of £5,000 which could mean borrowing as much as 99% of the property value as it is available on properties costing over £100,000 and up to £500,000.”
At present, it has a five-year fixed rate of 5.79% with no fee.
Accord offers a 99% Loan to Value mortgage with a minimum deposit of £5,000.
“Another lender who is thinking outside the box and is looking to support more first-time buyers with less than a 5% deposit,” says Richard Fernandes, a mortgage advice manager at Habito.
“They do restrict lending to 4.49 times income for these products but again another scheme set up to assist those with a lower deposit but can afford the lending they need to purchase their first home.”
The Helping Hand option at Nationwide lets eligible first-time buyers borrow up to six times their income – ideal for those on smaller incomes or looking to buy in pricey areas like London.
Most lenders cap their loans at 4.5- or 5-times income. For example, someone earning £36,000 could typically borrow up to £180,000.
But with Nationwide, someone on the average UK income could borrow up to £216,000 – and couples with a household income of £70,000 could potentially secure a £420,000 mortgage.
We break down all you need to know about mortgages and what categories they fall into.
A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.
Your monthly repayments would remain the same for the whole deal period.
There are a few different types of variable mortgages and, as the name suggests, the rates can change.
A tracker mortgage sets your rate a certain percentage above or below an external benchmark.
This is usually the Bank of England base rate or a bank may have its figure.
If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.
A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.
SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.
Variable rate mortgages often don’t have exit fees while a fixed rate could do.
“All applicants must be first-time buyers and there are minimum income requirements of £30k for a sole applicant or £50k for joint applicants,” says Hollingworth.
But it isn’t available to self-employed buyers.
To add to the attraction, you also get £500 cashback.
Halifax has a similar deal with its First Time Buyer Boost, which lends up to 5.5 times income.
This one is also open to couples where only one of you is a first-time buyer.
More than 50% of first-time buyers under 35 have help from the Bank of Mum and Dad.
But if your family can’t afford a cash gift then Barclays may have the answer.
The Barclays Family Springboard scheme allows first-time buyers to borrow as much as 100% of the property value if a parent puts 10% of the purchase price in a linked savings account.
The cash still belongs to them and earns interest, but it could be at risk if you fall behind on repayments and the property is repossessed and sold for less than the mortgage.
If a family member doesn’t have the cash to spare, then Buckinghamshire Building Society offers a similar deal, lending 100% if 20% of the purchase price can be secured against the parental home – though their house could be at risk if you failed to repay your mortgage.
Gen H is “worth a mention as well as they have options where a parent can help boost the borrowing or the deposit,” says Hollingworth.
The key difference between them and other lenders is that Gen H can accept deposits that have been loaned to the buyers from a family member rather than given.
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