Where does the current mortgage market leave first-time buyers?

In other words, even with the Government’s Guarantee Scheme due to finish at the end of the year, I was hopeful lenders would continue to offer low-deposit mortgages outside the confines of the scheme – as they have done using private mortgage insurance, for example - and indeed that we might tempt in other players, who would see a competitive sector for which there was ongoing demand.

To say that this now seems like a view from another era, is patently obvious. We have seen a seismic shift however in the mortgage market over the last couple of weeks coming as it did off the back of the Chancellor’s ‘Mini Budget’ and, in that sense, I’ve heard it described as ‘self-inflicted’.

However, I would take issue with this phraseology because it suggests that our market somehow inflicted the pulling of products/the raising of rates on itself, when of course we did nothing of the sort.

No lender in their right mind would have wanted to have taken the action they have needed to recently, but the fact that it was the result of series of measures announced by our own Government – and not from an outside source – seems even more galling.

So, where does this leave those first-time buyers who continue to want to get on the ladder but only have a smaller deposit to be able to do this? Well, for a start, I would suggest it leaves them wondering whether they want to go anywhere near the property ladder right now, regardless of whether they would be able to get a finger on the first rung.

Headlines abound around the potential for house price falls off the back of rates which seem certain to go up further. And the fact of the matter is that, for a borrower demographic that tends to want rate/payment certainty more than most, with fixed-rates at current levels, they are going to have to pay significantly more for the ‘privilege’ of securing finance.

And, of course, there is a significantly diminished array of 95% LTV products to choose from currently. Last month, those seeking to purchase an ‘averagely-priced’ property had 176 such mortgage products to choose from; my research today reveals that number is down by nearly 70%, at just 53.

Discounts and trackers are the ‘best’ priced products, but given the anticipation around the Bank of England raising rates again, you would have to factor this into monthly payments. Fixed-rate pricing has jumped considerably. Last month the best two-year fix was priced below 4%, now it is 5.28%, although you can pick up a five-year deal at 5.17%.

Now admittedly, this is the start of October, swap rates appear to have calmed a little, and many lenders have yet to launch back to market with repriced ranges. By the time you read this (I hope) we will see more lower-deposit products returning but they are still likely to be priced well above what was previously attainable.

Of course, rates are not the only consideration (and change) being made here, because we’re already seeing lenders upping their stress tests which will clearly impact on affordability and, of course, the loan size that can be secured.

Can we say it’s a ‘perfect storm’ for first-time buyers at the moment? I think we would have to go some to find a more difficult set of parameters to work within, albeit with the caveat of course that a couple of years ago we had just half a dozen 95% LTV mortgages to choose from, and even today, we are at almost 10 times the level of that low.

However, the drop in product numbers has been swift and somewhat shocking, and clearly it leaves first-time buyers wondering whether they should be shelving plans to purchase, and biding their time. It will not need me to point out just how important first-timers are to our market, and it somehow seems to fly in the face of an ongoing series of Government measures all designed to help people buy their first home.

In a stormy sky, it is difficult to see a shaft of light, but as mentioned, there are products still available and, if inflation can start to be controlled, then we might not see the need for big increases in Bank Base Rate.

That, of course, remains up in the air but we would simply urge lenders to keep reviewing their high LTV mortgage ranges in order to make sure those who are in a position to purchase, do have the finance available to do this. And lenders can of course continue to utilise private mortgage insurance to mitigate the risk, keep pricing competitively and ensure those not fortunate to have a ‘Bank of Mum & Dad’ to fall back on, still get the opportunity to buy.