Tidings of joy for first time buyers as lenders bring back 90 per cent mortgages

Happy Christmas first time buyers as lenders begin offering 90 per cent mortgages once more

Many first-time buyers were locked out of the mortgage market when lenders stopped offering 90 per cent mortgages. Now they are back

The beginning of the festive period has been marked with tidings of great joy for first-time buyers. Effectively locked out of the property market for months due to a lack of 90 per cent mortgages, the good news is that there are now at least five lenders who are prepared to help those with low deposits onto the property ladder and experts predict that more will follow.

The Bank of Ireland and Platform, which is part of the Co-operative group, have quietly started lending to those who have a 10 per cent deposit and Yorkshire Building Society joined them last week. Virgin Money followed their lead yesterday, Friday. Halifax has announced its intention to offer first-time buyer mortgages from next Tuesday, December 8.

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The Yorkshire Building Society deals include a two-year fixed rate at 3.69 per cent, and a five-year fixed rate at 3.79 per cent, both have a £995 product fee for first-time purchasers, movers and those who want to remortgage.

Five lenders are now offering 90 per cent mortgages that require a 10 per cent deposit and more look set to follow.

The Halifax deal is for first-time buyers only and if there is a joint application one person must be a first purchaser. New builds are not included and the maximum loan is £500,000.

Ben Merritt, senior mortgage manager at Yorkshire Building Society, said: “We know it’s been a really tough few months for borrowers with smaller deposits but we hope returning 90 per cent loan-to-value mortgages to our core range will provide a welcome boost to people wanting to get on to, or move up the ladder

“We designed the new range to include something for homebuyers, movers and people remortgaging to make sure our options meet the varying needs of those borrowing more money against the value of their house.”

The Yorkshire Post mortgage columnist Andrew Milnes of the Mortgage Advice Bureau in Bingley says: “HSBC were the biggest lenders of 90 per cent mortgages but they pulled out because when the housing market reopened they were swamped with business and others followed them. A few lenders dipped their toe in the 90 per cent lending market but only for two or three days then they pulled out again, which was very frustrating. The Halifax and Yorkshire Building Society’s commitment to offer this high loan-to-value product again is a godsend and I think other lenders will follow in the new year.”

Meanwhile, residential buy-to-let, which is a strong market thanks to investors moving out of commercial property, and into what they now see as a safer medium to long-term asset, will find that mortgage rates have risen slightly. According to Moneyfacts, the average two-year fixed rate, buy-to-let mortgage is 2.9 per cent, which is 0.13 per cent higher than it was just before the pandemic took hold.

What the new year will bring for house prices is the subject of great debate. Market reports and predictions are rolling in now that a new year is fast approaching.

All forecasts carry the caveat “it depends what happens to the economy” but Yorkshire is in a strong position thanks to the buffer of unexpected and exceptionally strong price growth this year. The rise averages at about seven per cent.

The latest thoughts on the future come from Nationwide, which published its latest house price index this week. It showed that UK annual house price growth rose to 6.5 per cent in November, the highest rate since January 2015. Values were up 0.9 per cent month-on-month, after taking account of seasonal factors

As for 2021, Robert Gardner, Nationwide’s chief economist, says: “Data suggests that the economic recovery had lost momentum even before the latest lockdown came into effect. Economic growth slowed sharply from 6.3 per cent in the month of July to 2.2 per cent in August and 1.1 per cent in September, even though the economy was still around eight per cent smaller than its pre-pandemic level at that point.

“Labour market conditions also weakened with the unemployment rate rising to 4.8 per cent in the three months to September. This is still low by historic standards but up from an average of 3.8 per cent in 2019. Despite these headwinds, housing market activity has remained robust. The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy.”

Nationwide also reassessed its data on national parks. It suggests that a property located within a national park attracts a 20 per cent premium over an otherwise identical home.

This equates to an average of £45,000 per home. Properties within three miles of a national park are also seeing an uplift in values. This fringe benefit sees them command a six per cent premium.

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