First Time Buyers ‘Affected By Mortgage Product Withdrawals’

Consumers looking to take their first steps on to the property ladder could find such a process becoming more difficult, new research indicates.

In a study carried out by Moneyfacts it was revealed that the proportion of money lenders offering mortgage products with loan-to-value (LTV) rates of at least 100 per cent has diminished over the last three months. Around one in three (41) of the 123 prime mortgage providers on the market were revealed to offer products of 100 per cent LTV or more in November last year. Since this time it was stated that about a third of such suppliers have withdrawn these deals.

Now there are 28 of these providers in existence, with just two lenders with 125 per cent deals - Birmingham Midshires and Northern Rock. The latter is indicated as pricing “themselves out of the market”, while the former issues loans solely via intermediaries. Furthermore it was pointed out that many of the financial services firms with such products only issue 100 per cent mortgages to professionals or as a part of a special arrangement.

Due to the withdrawal of such products it is possible that consumers may experience more difficulties not only in making mortgage payment but meeting other financial demands such as loans, credit and store cards and utility bills.

Julia Harris, Moneyfacts analyst, reported that such moves will place further monetary pressure on those wanting to take their first steps on the housing ladder. She said: “This is yet another example of lenders continuing to tighten their belts even further in what has become a vastly different mortgage market from this time last year. Prospective first-time buyers are those that are going to be most affected by this move. Not only are there fewer options for those without a deposit but they will also find themselves having to pay a larger premium for the added risk that the lender is taking on. The table below highlights the additional costs of a 100 per cent mortgage compared to a situation where you are in a position to provide a five per cent deposit.”

And with property prices beginning to fall, Ms Harris pointed out that some industry experts believe the Bank of England’s monetary policy committee will opt to further cut the base rate of interest over the remainder of this year. Consquently, she claimed that now may be an ideal time for prospective first-time buyers to take advantage of competitive saving account rates and put money away to save for a deposit.

For those consumers concerned about their ability to save enough money for a sizeable deposit or worried that they may be unable to afford mortgage repayments, a low-rate loan could prove to be of assistance. Although this represents another financial demand, a loan taken out for the purposes of debt consolidation could help borrowers to generate more disposable income in months to come. This may be of particular assistance to prospective first-time buyers after a recent study by the Royal Institution of Chartered Surveyors revealed that the cost of being a home purchaser has gone up by some 351 per cent since 1996. It was claimed that a first-time buyer couple on a lower-quartile salary would need to save more than a year’s income to be able to meet up-front property expenses.

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