Number of new homebuyers entering the market recovers to pre-recession levels for the first time
- 370,000 new first-time buyers enter the market in 2018
- This marks the first time new buyer numbers have hit pre-recession levels
- Banks lent £62billion in first-time buyer mortgages over the course of the year
The number of new homebuyers entering the market has recovered to pre-recession levels for the first time, official figures have revealed.
There were 370,000 new first-time buyer mortgages completed in 2018, some 1.9 per cent more than in 2017, according to data released today from trade body UK Finance.
This is the highest number of first-time buyer mortgages since 2006, when the figure stood at 402,800.
There were 370,000 new first-time buyers in 2018, 1.9 per cent more than in 2017
Banks lent a total of £62billion in first-time buyer mortgages over the course of the year, a 4.9 per cent increase on the amount lent the year before.
The high volume of new buyers entering the market has been attributed to a combination of low rates on high loan-to-value mortgages, government schemes such as Help to Buy, family-link style mortgages which enable homeseekers to buy with no deposit, stamp duty exemption, and fewer landlords renting out properties.
Richard Campo, managing director of Rose Capital Partners, said: ‘Lenders have been making it easy for first-time buyers over the last couple of months, with several providers announcing reduced rates on high loan-to-value mortgages.
What do the mortgage brokers say?
Andrew Montlake, director at Coreco
Andrew Montlake, director at Coreco Mortgage Brokers, said: ‘The prevailing low rate environment, Government schemes such as Help to Buy and good old fashioned competition between lenders have helped to encourage more people to take that all important first step on to the property ladder.
‘With amateur buy-to-let landlords being stifled by tax changes, there is also more property available for first timers.’
Shaun Church, director at Private Finance
Shaun Church, director at Private Finance, said: ‘It’s tempting to be swayed by headline rates and cashback deals in this ultra-competitive market, but before rushing into a mortgage, we would urge first-time buyers to shop around.
‘It’s vital to understand the total cost of a mortgage over the full term, when all fees and costs are taken into account.’
‘There are currently over 17,000 products available for first-time buyers.’
The number of deals available to first-time buyers without large deposits has been steadily increasing.
Research from consumer ratings firm Defaqto recently revealed that there are now 46 per cent more 95 per cent loan-to-value deals than there were a year ago.
And these high loan-to-value deals have also steadily been getting cheaper.
The average two-year fixed rate at the maximum 95 per cent loan-to-value has fallen by 0.54 per cent since the base rate last moved in August.
Since the start of the year, several big brands including Barclays, HSBC, Lloyds Bank, NatWest and Santander have all cut rates across their high-LTV two and five-year fixed deals.
The result of this increased competition at the high LTV end of the market has been more choice and cheaper rates for first-time buyers.
On top of this, lenders are trying to lure in new buyers with innovative ‘no-deposit’ mortgages.
Sometimes described as 100 per cent loan-to-value mortgages, in reality these deals do require a deposit of some sort, and usually require a close family member to help out.
Last month Lloyds Bank launched a deal that lends first-time buyers 100 per cent of the property purchase price so long as a family member agrees to deposit savings equivalent to a minimum of 10 per cent of this loan into a fixed-rate savings account with the bank.
And Lloyds are far from the only lender which has entered this space in recent years.
Barclays offers a very similar deal known as the family springboard mortgage and Nationwide will allow parents to borrow extra on their mortgage to gift to children as a deposit.
Aldermore Bank, Harpenden Building Society and Family Building Society also offer versions of a family mortgage, many of which require family members to use their own homes as security in place of depositing savings with the lender.
Lenders have started to offer deals that make it possible to get a mortgage without a deposit
To further encourage first-time buyers the Chancellor announced in the Autumn Budget that stamp duty relief for first-time buyers would be extended to those purchasing a shared ownership property valued at less than £500,000.
> Click here to use This is Money and L&Cs mortgage finder tool
> Click here to read our guide to 95 per cent mortgages
You can now buy a home with just £10,000 – but is it a good idea?
With a 95 per cent mortgage, first-time buyers able to pass mortgage affordability tests could put down a 5 per cent deposit of £10,000 and buy a £200,000 home.
But is that a good idea? Didn’t small deposit mortgages crash the economy a decade ago? Are they not leaving themselves heavily overexposed to falling house prices?
In this podcast we dig into the world of buying a home with a small deposit mortgage, busting the myths and considering the benefits and the risks.
Press play to listen to the show above, or listen (and please subscribe if you like the podcast) at Apple Podcasts, Acast and Audioboom or visit our This is Money Podcast page.