Buying a house is one of the most significant financial commitments a person can make. There are many factors to consider, such as location, size, and the amount of money you can afford to spend. However, for many first-time buyers, the most significant obstacle is getting a mortgage. In recent years, many mortgage lenders have been retreating from first-time buyers with low deposits, making it increasingly challenging to get on the property ladder.
Why Are Mortgage Lenders Retreating?
The primary reason for lenders retreating from first-time buyers with low deposits is the economic uncertainty caused by the COVID-19 pandemic. Lenders are becoming more cautious and selective about who they lend to, and they see first-time buyers as a higher risk. As a result, many lenders have increased the minimum deposit required to obtain a mortgage.
Another factor is the government’s changes to the Help to Buy scheme. The scheme was designed to help first-time buyers get on the property ladder by providing an equity loan of up to 20% of the property’s value. However, the scheme has been scaled back, and from April 2021, it will only be available to first-time buyers purchasing new-build properties.
What Does This Mean for First-Time Buyers?
For first-time buyers with low deposits, the retreat of mortgage lenders can be frustrating. It means that they may have to save for longer to get on the property ladder, and some may even be priced out of the market altogether. It’s a significant setback for those who have been working hard to save for a deposit and are eager to take the next step in their lives.
However, it’s not all bad news. There are still some lenders out there who are willing to lend to first-time buyers with low deposits. It may take a bit more research and effort to find them, but they do exist. Additionally, there are other schemes available, such as shared ownership and the Lifetime ISA, which can help first-time buyers get on the property ladder.
What Should First-Time Buyers Do?
If you’re a first-time buyer with a low deposit, it’s essential to do your research and understand your options. Start by speaking to a mortgage advisor, who can help you determine how much you can afford to borrow and what type of mortgage might be best for you. They can also help you navigate the application process and find a lender who is willing to lend to you.
It’s also a good idea to explore other schemes and options, such as shared ownership and the Lifetime ISA. These can help you get on the property ladder with a smaller deposit and less upfront cost.
The Bottom Line
Mortgage lenders retreating from first-time buyers with low deposits is a setback for those who are eager to get on the property ladder. However, it’s not all bad news. There are still options available, and with a bit of research and effort, first-time buyers can find a lender who is willing to lend to them. It may take longer to save for a deposit, but it’s still possible to achieve the dream of homeownership.