“The Spring Budget was incredibly disappointing. The industry expected a lot more [for first time buyers and home builders],” said Jonathan Stinton, Head of Mortgage Relations at Coventry Building Society. Thankfully, competition and lenders’ creativity means first time buyers and those re-mortgaging have an array of mortgage options to help get them on and up the ladder.
Low deposit options
The cost-of-living crisis means saving for a deposit has never been harder. Fortunately, it is this part of the market that has seen much of the recent innovation. In a refreshing departure from standard considerations, Skipton’s Track Record Mortgage uses your rental history to determine how much you can borrow. No deposit is required and no more than 5% is allowed! To qualify, you must have paid rent for 12 consecutive months (out of the last 18 months), be over 21 and borrow up to £600k. If successful, you can enjoy a 5-year fixed rate of 5.45% and zero fees. Note this mortgage is only valid for existing houses, and new build houses (not flats).
If you have a 5% deposit and dream of owning a new build (house or flat), check out the Deposit Unlock scheme. Created by the Home Builders Association, this is specially designed for new builds costing up to £750k and has numerous home builders (including Weston Homes) and a few lenders including Nationwide participating.
These mortgages are only available via a broker and cannot be used in conjunction with another scheme such as Shared Ownership. Nonetheless, with a 5% deposit a broker can let you access Nationwide’s 2 year fixed rate of 5.39% (£999 arrangement fee or 5.59% no fee), or a 5 year fixed rate at 4.99% (£999 arrangement fee or 5.14% no fee). Both come with a free valuation and First time buyers also benefit from £500 cashback.
Reach further
Without a punchy deposit or external help, many first-time buyers struggle to borrow enough on their mortgage to buy their first home.
“Nationwide’s Helping Hand scheme offers first-time buyers the opportunity to secure larger loan amounts, up to 20% more with a five per cent deposit. For instance, on a joint income of £50,000 and a modest 5% deposit, buyers could potentially borrow up to £275,000,” said Matt Towe, cofounder at Meet Margo.
Nationwide’s enhanced affordability is available on their 5 or 10 year fixed rate mortgages, with the 5 year option offering an initial rate of 5.09%, a £999 arrangement fee, free valuation and £500 cashback.
It’s a family affair
Relatively new to the mortgage scene, Generation Home specialises in lending to families and is on a “mission to make everyone a homeowner” by providing ways to help first time buyers and those remortgaging boost their deposit and income.
The deposit booster lets close friends or family members lend up to 100% of the deposit as a loan, equity loan, a simple gift or any combination of the above. Plus, you can have more than one deposit booster on your mortgage application. There is no charge over the depositor’s home and their loans are returned through monthly repayments or when the property is sold, enabling the parent, for example, to support another family member at a later date.
The income booster is solely limited to family members who must join the mortgage, but not the deeds (avoiding extra stamp duty charges). They can either act as a payment backstop, or make regular payments to build up their own equity stake in the property. Again, you can have more than one income booster. When the additional help is no longer needed, the booster is removed from the mortgage with their equity share gifted to you or returned to them when you sell or re-mortgage. Income boosters must take independent legal advice before proceeding.
With a 10% deposit, Generation Home currently offer a 5-year fixed rate of 5.18%, with no fees. Existing customers get a preferential rate of at 5.07% with no fees.
Go Green
Buying an energy efficient, sustainable home, (such as Weston Homes’ award winning Abbey Quay development ) can help you save the planet and save you money on your mortgage. These saving are likely to be small, with green mortgages typically just 0.1-0.15% below a lender’s standard rate and they are rarely market leading. Nonetheless, when combined with the property’s lower running costs, you are still likely to be better off than with an equivalent mortgage on a less efficient home.
Lenders and home builders’ determination to help people onto and up the property ladder has seen a raft of new mortgage products over the last few years. Make sure you use a whole of the market, independent mortgage broker to ensure you find the best deal for you.
