The shortage of low deposit mortgages during the pandemic will have a wider impact beyond first-time buyers, commentators have warned.
At the start of November the number of 90 per cent LTV products stood at 56, down by 93 per cent year-on-year, according to data from Moneyfacts.
Alex Kemp, partner at Ideal Mortgage Advisers, said requirements for a 15 per cent deposit to access most lenders’ product ranges could be freezing out some first-time buyers.
Adam Wells, director at Lloyd Wells Mortgages, recounted a recent example of clients looking to purchase a three-bedroom terraced property for £300,000 with a 10 per cent deposit.
Mr Wells said: “With the new requirement for a 15 per cent deposit, they now need £45,000.
“With the £30,000 they have, they can only afford to purchase £200,000 properties, which would be a two-bedroom flat in the area they want to live in.
“It simply doesn’t make sense and they have decided to rent for another year and see where they stand in 2021.”
Mr Kemp added: “Lenders aren’t assisting greatly by only releasing products for either a few days or weeks at a time, as most buyers wouldn’t be sitting on an accepted offer and then waiting for rates to be released.”
Impact on second-steppers
Carl Shave, director at Just Mortgage Brokers, said that “too many” first-time buyers were unable to get a mortgage amid a shortage of higher LTV products.
Mr Shave added: “With first-time buyers playing such a pivotal role in the ability of the housing market to function, the ripples of this will be felt by all who wish to move.”
Marc von Grundherr, director of estate agent Benham and Reeves, agreed: “There’s no doubt the range of products available to first-time buyers has reduced in recent months and lenders have certainly tightened their belts in terms of what they’re willing to lend.
“This in turn is causing a degree of disruption further down the property purchasing life cycle for those looking to take their next steps to a second, larger property.”
He added: “While demand has boomed for larger homes following lockdown, those looking to make this purchase are also reliant on selling their smaller first home in order to finance it.
“However, it’s taking longer for them to find a suitable buyer in order to do so and this is having a knock-on effect with their onward purchase and delaying the progression of a sale.”
Likewise, Eve Morgan, owner and consultant at Morgan Harrison Mortgage Solutions, commented that an absence of first-time buyers would make it more difficult for others to step up and impact the market as a whole.
Ms Morgan added: “I also think it is worth remembering that it isn’t just first-time buyers that need help. There are also existing homeowners who are struggling to move as they may have limited equity.”