Mortgages for first time buyers without a big deposit are becoming scarcer, with just 36 deals available for new homeowners looking to borrow more than 90 per cent of the value of a property, research from online mortgage company mform.co.uk has found.
The findings come as the last six months have seen the lowest number of first time buyer mortgage
approvals since records began, with 109,900 loans agreed compared to 180,300 in the same period last year.
Most lenders ask for a substantial deposit of 20 per cent for many best buy mortgages, which is equivalent to £37,000 on the average property. On top of that, most borrowers will also have to pay an average arrangement fee of £1,000.
When announcing its merger with HBOS, Lloyds TSB said it would focus on competitive first time buyer deals, but other than that, only Principality Abbey and Halifax continue to offer 95% LTV mortgage
Francis Ghiloni, mform.co.uk marketing and business development director, commented: "First-time buyers should be benefiting as house prices fall but unfortunately they are unlikely to be able to benefit as very few have around £15,000 for a deposit.
"There's little availability when it comes to generous loan to value ratios and the few lenders still offering above 90 per cent tend to charge a little extra to cover the cost of the increased risk of loss in the event of a forced sale."
Mform.co.uk recommends that "The advice to first time buyers remains to sit tight and build your deposit, this way when you do apply for a mortgage you’re more likely to avoid the hefty fees which push up the true cost of these mortgages."
According to the National Association of Estate Agents (NAEA), potential would-be homeowners are doing just this, as the percentage of property sales to first time buyers fell to 8.3 per cent, down from 10.7 per cent in June.
The Government's belated decision for a temporary stamp duty holiday has failed to have the desired impact on the property market, as NAEA
President Chris Brown stated:
"August was a month of indecision and this evidently had a profound effect on the market, as many consumers adopted a 'wait and see' attitude while waiting for a decision from the Government on stamp duty."
Research from the Co-operative Bank shows that a quarter of would-be homeowners delay getting married or starting a family, or make other sacrifices in order to save up for a deposit – a sharp contrast to last year when more than half said they were not prepared to make sacrifices to get on the property ladder.
More than half of potential first time buyers said they believed renting property was 'money down the drain', and a fifth remain optimistic, saying that they expect property prices to rise again over the long-term.
Commenting on the research, Victoria Drummond, operations manager for Ownhome, the Co-operative's shared equity scheme, said: "This new research shows that the dream of owning a home is now out of reach for many first time buyers, as they struggle to save a deposit against a backdrop of soaring household bills and the increased cost of living.
"It is vital that the Government an the housing industry continue to offer simple, clear and innovative products that provide first time buyers with essential financial support needed to help them take their first steps on the property ladder."
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