Patience may be the best option for first-time buyers

A mortgage drought for first-time buyers is causing heartache but the future looks brighter

First-time mortgages at 90 per cent loan-to-value will return

Property prices for first-time buyers have increased 69 per cent in the past decade, with the average UK price rising from £142,473 in 2010 to £241,025 today, according to the latest Halifax data.

In Yorkshire, first-time prices have risen from £105,993 to £161, 933 up 53 per cent and over the past year prices rose by eight per cent In London, the average first-time buyer property has nearly doubled in price to £463,536, with prices in the South East increasing by 73 per cent to £303,838,

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First-time buyers make up half of the property market, up from 38 per cent in 2009. The share has steadily risen since the introduction of Help to Buy in 2013. The average first time buyer age is 31 and is putting down record deposits for their first home, averaging £47,059 in 2020. Deposits as a percentage of the property value continue to fall from a peak of 27 per cent a decade ago, to 20 per cent today.

However, a significant number of first-time buyers have had their dreams of home ownership shattered as 95 per cent loan to value mortgages are virtually non-existent and 90 per cent mortgages are rare and wait times from application to completion have doubled from up to six weeks to up to 12 weeks.

Andrew Milnes, business principal at Bingley-based Mortgage Advice Bureau, says: “It is incredibly tough for young people. The one beacon of hope for a 90 per cent mortgage was HSBC but they have pulled out of that high loan to value market for the time being.”

He suggests that a Barclays Springboard mortgage may be an option for some, which is where family or friends provide a deposit, which is paid back steadily with interest via the bank. The bank of mum and dad who lend direct to offspring may also help and Santander may allow a loan to boost a deposit, provided you can easily pay it back.

New research from insurer Legal & General and economics consultancy Cebr has found that almost one in four home purchases this year will be backed by the “bank of mum and dad” with Yorkshire family lending an average £13,800 to help loved ones.

Yet patience may be the best option, says Andrew Milnes: “The problem is not that lenders do not want to offer 90 per cent mortgages, it is that they don’t have the capacity to deal with mortgage demand at the moment. The deals will come back and so now is the time to get paperwork in order and get mortgage ready.”

Buyers who are priced out of home ownership may take heart at government plans to create affordable homes with a new approach to shared ownership. Housing Secretary Robert Jenrick announced a new £11.5 billion Affordable Homes Programme to be delivered over five years from 2021 to 2026 and providing up to 180,000 new homes for rent and shared ownership across the country, should economic conditions allow.

Councils, housing associations and private providers can bid to provide them. The first properties will be made available from next year. The new model for shared ownership reduces the minimum initial share you can buy from 25 per cent to 10 per cent. After that you can buy additional shares in one per cent instalments, with heavily reduced fees There will also be a 10-year period for new shared owners where the landlord will cover the cost of any repairs and maintenance.

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James Mitchinson