The first time buyer mortgage is in danger of becoming a rare breed as they become less and less affordable to those without a deposit.
Cheltenham and Gloucester, part of the Lloyds TSB Group, will no longer offer first time buyers or those with less than 10 per cent equity in their property a mortgage for more than 90 per cent of the value of their homes.
After the mass exodus of 125 per cent mortgages last week when all lenders withdrew such deals, and a further 15 lenders having stopped offering 100 per cent loans since the credit crisis broke last year, experts are concerned that the first time buyer mortgage
market is becoming an increasingly tricky one for them to navigate, as they have already found it inhospitable in the wake of tighter lending criteria and increased rates.
In order to secure a mortgage with those lenders which require a 10 per cent deposit, based on the average house price of £179,358, home buyers now have to scrape together almost £18,000.
Mortgage lender John Charcol believes that buyers with no deposits are slowly but surely being "nudged out of the race" for mortgages. Charcol’s Katie Tucker explains why times are hard for these people: "The mortgage market is readjusting and the housing market will follow. The accommodating lending criteria of the last decade has allowed many people to buy who otherwise wouldn’t have been able to, which has helped push property prices through the roof."
She continued: "Following last weeks mass withdrawal of all mortgages that allowed you to borrow more than the value of your property, first time buyers with no deposit, or existing debt will find it difficult to buy now. I expect to see more parents trying to raise money from their own homes to gift as a deposit, and to see more lenders to find less risky ways to help, such as the First Start mortgages where parents’ spare income can be used."
The British Banking Association commented on the high gross mortgage lending data for January, explaining that it wasn't first time buyers that were pushing up figures because new purchases were down to one of the lowest levels on record.
BBA statistics director, David Dooks, said: "Higher gross mortgage lending in January largely reflected very strong remortgaging activity, as borrowers sought out the best deals available. Although house prices and new loans for house purchase appear to be subdued as the housing market slows, the strength of remortgaging would suggest competition for mortgage business and switching remains high."
Miss Tucker concluded: "There are lenders still offering 100% and 95% mortgages, for now, and borrowers should seek advice from a whole-of-market mortgage broker very soon if they want one."
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