By Kate Brown
In the past year, mortgage providers have allowed applicants to put down deposits of as little as 5%. Figures provided by the financial information service Moneyfacts reported this to be the first time since the 2008 financial crisis that the number of deals allowing applicants to put down a 5% deposit has reached over 300 in the UK. Current statistics show that 307 deals are now on the market, compared to just 253 last year.
A representative from Moneyfacts, Charlotte Nelson, stated that the increased number of deals at this loan-to-value level should improve competition and that this was previously an area of the market that was often neglected. Managing director of Barclays Mortgages, Hannah Bernard, said: “spring is traditionally a period of increased house buying activity and providing competitive rates will enable more first-time buyers and those with smaller deposits to get on, and move up, the property ladder”. For first time buyers looking to purchase a home with a low deposit, the market is looking more positive and whilst a greater range of choice seems appealing, buyers are encouraged not to wait around.
Figures from Nationwide Building Society calculated that first-time buyers would typically save for 2 to 3 years to afford a deposit at this loan-to-value level, however this can vary considerably depending on region and average house prices. Dan Wilson Craw, of the Generation Rent lobby group, said: “high housing costs are eating into renter’s take-home pay which makes saving for a deposit difficult in the country as a whole but near impossible in London and the South East of England.”
However, government initiatives such as the Help to Buy ISA can support first time buyers save for a deposit. The scheme allows for prospective buyers to gain a maximum bonus of £3000 for a deposit by saving £200 a month into a tax-free savings account. The Help to Buy ISA has been available since 2015 and they have already helped more than 320,000 people secure their own home.
UK mortgage approvals hit near five year low
Middle income earners show decline in home ownership