Upward Trends in Low-Deposit Mortgages and Schemes for First-time Buyers

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In summer 2020, mortgages requiring 10% deposits, were at a low level, mainly in response to Covid-19 and there were around 44 products available for buyers. This wasn’t good news if you were struggling to get on the housing market or a first-time buyer – which was especially disappointing considering the stamp-duty holiday proposed by the government.

However, the market is bouncing back and there are now around 200 products for buyers with many products requiring a 15% deposit, which is more encouraging for first-time buyers. There’s still a long way to go though, compared to March 2020 when there were 780 10% products available.

Bounce in Confidence

Low deposit mortgages greatly declined as the economic fallout from Covid-19 started to become clear. This is because lenders see first-time buyers and young buyers at a greater risk of default during recessions and the higher levels of redundancy in younger age groups.

Because there’s been a healthy increase in the number of buyers in the housing market, largely due to the stamp-duty holiday, this has given lenders more confidence to provide more low-deposit products again, which is better news for younger buyers and their plans for the future.

Shared Ownership Increases

Shared Ownership schemes can be a really useful way for younger buyers to enter the housing market. In Spring 2021, there are set to be changes to the government’s Shared Ownership scheme, part of Help to Buy. If a property is included in a Shared Ownership scheme then a buyer can purchase between 25 and 75 percent of the home’s estimated value and pay rent on the remaining share that belongs to a local housing association. You can then buy more shares in the property at 5% and 10% intervals.

However, in April, the terms will change to make it open to more buyers:

  • The minimum number of shares in a property a person can buy is reduced to 10%
  • You must be a first-time buyer earning less than £80,000
  • Possible to buy extra shares in a property in 1 percent instalments with fees for buying them reduced
  • Landlords will pay the price of repairs and maintenance for the first 10 years of ownership
  • Rules around selling the property are set to change

Therefore, if you were buying a property under Shared Ownership for £100,000, you would only need a deposit of £10,000, plus a mortgage to cover the rent to the owners of the property. It gives younger first-time buyers more of an opportunity to get on the housing ladder – especially considering how much everyone has been affected by Covid-19 and people’s plans and finances have been thrown up in the air.

The government’s move to help more people buy affordable homes with Help to Buy and Shared Ownership schemes will hopefully be a move in the right direction and give more confidence back into the housing market and give people a tangible chance to own their own property.

For more information about getting on the housing ladder and buying your own property, get in touch with our team at Home EA today.




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