Mortgage deals that can help first-time buyers get ahead in tough property market

Meanwhile, according to Santander’s customer data from the first quarter of 2024, a fifth of people taking their first step on the property ladder are aged over 40.

David Hollingworth, associate director, communications at L&C Mortgages says: “Nothing seems to get easier for first-time buyers and the twin challenges of deposit and affordability remain.

“House prices have remained stubbornly high despite a slower market, which means saving a deposit and being able to borrow enough is tough.

“Nonetheless the demand from aspiring first-time buyers is still strong despite the higher interest rates now in play. Rents have risen rapidly as well and that coupled with limited security that renting gives means first-time buyers are still keen to take the first step onto the ladder.”

The mortgage market remains competitive, he says, with various deals aimed at giving first-time buyers a helping hand.

Skipton Building Society, for example, offers a “track record” mortgage, which uses borrowers’ rental history to help them onto the property ladder, lending up to 100 per cent of the property purchase price.

Yorkshire Building Society also offers a £5,000 deposit mortgage.

Hollingworth says such deals could “accelerate the ability to buy for some that are struggling to amass a deposit whilst also paying stiff rents”.

When comparing mortgage deals, Hollingworth emphasises the importance of checking eligibility requirements. The Yorkshire’s deal, for example, is not available for flats or new-build houses.

He adds: “The majority of deals will require a minimum (deposit) of 5 per cent and it’s still the case that a bigger deposit will help to broaden the range of options and the rates on offer.”

Parental help will still be a key contributor for many – and Hollingworth says that’s something lenders recognise.

Some mortgages, such as Barclays family springboard, offer up to 100 per cent borrowing where a family member or friend is able to offer cash as additional security. With the Barclays deal, the money goes into a savings pot linked to the mortgage and is later returned, subject to terms and conditions.

“Many will also allow a parent to be joint on the mortgage to boost the amount of borrowing available without insisting on them being a joint owner,” adds Hollingworth.

Of course, many people do not have families who are in a position to offer financial support.

The Lifetime Isa is also an option for those looking to boost their savings for their first home, as it adds a bonus on pots of cash.

Barclays’ research also found that just under a fifth (19 per cent) of young adults are worried that buying a home would mean their mortgage payments continuing into retirement.

Tim Bannister, Rightmove’s property expert says: “Stretching to a longer mortgage term will increase the overall cost of the mortgage due to higher interest payments, but for many, the reduction in monthly payments can be the difference between being able to afford the home that they want or not.”

According to recent figures from trade body UK Finance, around one in five (21 per cent) new first-time buyers took out mortgage terms stretching beyond 35 years in the first quarter of this year.

Richard Donnell, executive director at Zoopla, says: “The big trend in recent years is to borrow for over 30 years to get that extra five-to-10 per cent of buying power but at the cost of paying more interest over the life of the loan.”

Donnell suggests that aspiring first-time buyers try to focus on seeking where they can get better value for money.

To make sure you’re getting the most bang for your buck when searching for homes, Donnell also suggests considering how much you’re paying on a “pounds per square foot or per square metre basis”, adding: “At the end of the day you are buying space.”