First-time buyer 90% mortgages are reserved for ‘gold-plated’ borrowers, warn mortgage brokers

Aspiring homeowners hoping to buy their first property with a 10 per cent deposit face limited choice and higher costs than they did a year ago.

Of the 86 mortgages available to first-time buyers with a 10 per cent deposit, only 25 of these mortgages are available to all, according to analysis by Defaqto.

It found that 22 mortgages are restricted by postcode, 25 are not available in Wales and 18 are only available through selected intermediaries.

‘There are some quirky regional building societies giving fairly good 90 per cent mortgage deals but they are only for selected postcodes,’ said Chris Sykes, mortgage consultant at Private Finance.

‘Then there is Nationwide, for example, with its 90 per cent offering excluding the self-employed.’

It means, although there are more deals available to first-time buyers than a month ago, many borrowers still can’t access them.

To make matters worse, according to Defaqto, on average these mortgages are 12 per cent more expensive than they were a year ago.

Which lenders are offering the best deals? 

TSB is currently offering the best deal for first-time buyers looking for a mortgage with a 10 per cent deposit.

The lender is offering a two-year fixed rate of interest at 3.24 per cent with its upfront fee of £995 offset by a £500 incentive offer.

This means, for someone looking to buy a £200,000 property with a £20,000 deposit they will face monthly repayments of £876.

Other mainstream lenders offering 90 per cent mortgages to first-time buyers include Halifax offering an initial two-year fixed rate of 3.54 per cent and Nationwide and Lloyds, both offering an initial rate of 3.49 per cent.

‘It’s great to see big players such as Halifax and Nationwide re-entering the 90 per cent mortgage market in order to help first-time buyers onto the housing ladder,’ said Matt Coulson, founder of the mortgage broker, Heron Financial.

‘However, these products are not without their restrictions with some products only accessible to those with a gold-plated credit score.’

Are these deals likely to disappear?

The number of mortgage products on the market increased for a second month in a row in November, according to the latest Moneyfacts data.

For borrowers needing a mortgage to cover 90 per cent of a property’s value, the number of available deals increased by 36 per cent in the past month alone.

Some experts deem this as a sign the mortgage market is beginning to return to some normality.

‘We think that we will only see more lenders re-enter the 90 per cent mortgage market as time goes on,’ said Chris Sykes, mortgage consultant at Private Finance. 

David Hollingworth of L&C mortgages added: ‘As the range of lenders increases so it should help give others the confidence to re-enter the market without putting their service at risk of a tidal wave of business.’ 

Are mortgage rates likely to rise or fall next year?

Some experts believe, with increased competition between lenders, rates are likely to come down further over the coming months. 

‘Over time this should help to improve the range of rates on offer,’ said Hollingworth.

‘Nonetheless it’s still likely to be a gradual improvement and there’s still likely to be deals coming and going, as lenders manage their product offering and service.’ 

Advice for first-time buyers?

Being on top of your credit score, which includes registering for the electoral roll, is essential along with knowing your finances inside out, according to Coulson.

‘Be fully aware of your income and all of your outgoings by regularly reviewing bank statements, pay slips and even those monthly gym subscriptions you may have forgotten about,’ said Coulson. ‘Every penny matters.’

‘Save up as much of a deposit as you can – this may mean calling on family members for help or borrowing a loan from mum and dad.

‘Lastly, have a chat with an expert as there are specialist deals available through mortgage intermediaries which potentially offer a number of extra offers to first-time buyers looking to realise their dream of securing a first home.’