The British want to move house again. But worsening delays in conveyancing, surveying and search services mean that some may miss out on the current stamp duty holiday.
Meanwhile, more and more first-time buyers are being shut out as interest rates rise and loans of 90 per cent or more are withdrawn.
Is your or your children’s route to the property ladder barred if you have only a small deposit saved? Or can you still realise the dream of a home of your own?
Getting onto the ladder: Can you still realise the dream of a home of your own in these troubled times?
Why are some mortgage rates going up?
The Bank of England may cut its base rate from 0.1 per cent to 0.01 per cent to stimulate the economy. But the stamp duty holiday, introduced in July, has pushed up demand for mortgages.
Banks and building societies, buckling under the pressure, are restricting lending to first-time buyers, raising rates and imposing new conditions.
HSBC has a 1.44 per cent first-time buyer deal. But only those with a 40 per cent deposit can apply for this loan (rated a best buy by Moneyfacts, the analytics group).
How much can I borrow to buy a home?
It’s possible that you may be priced out of the location where you hoped to buy. Lenders may now only advance four-and-a-half times your income, a s opposed to five-and-a-half times previously.
Until March, 95 per cent loans were plentiful. Not any more. Nationwide offers a 90 per cent mortgage with a 3.49 per cent rate fixed for two years. Nationwide also demands that a maximum of 25 per cent of a deposit can come from a gift.
Borrowers with an 80 per cent deposit are better treated. First Direct has a two-year fix at 1.99 per cent, for example.
Didn’t the Government promise we could get 95 per cent loans?
Boris Johnson vowed to turn Generation Rent into Generation Buy, with state-backed 95 per cent mortgages, repayable over as long as 40 years.
But this may not materialise as the banks are reluctant to relax affordability checks and younger borrowers could lose their jobs due to the pandemic.
Should I rush to buy now, or would I be better off waiting until the stamp duty holiday ends in the hope prices will be lower?
The stamp duty holiday which allows us to escape tax on a home of £500,000 or less, ends on March 31, 2021.
After that date, the first-time buyer exemption on homes of up to £300,000 will still be available.
But Grainne Gilmore, Zoopla’s head of UK research, warns: ‘Anyone without a large deposit who is waiting until next year, in case a slowing market offers up bargains, has to consider the risk that lending grows even tighter.’
Will the availability of mortgages get better soon?
Jonathan Harris, of Forensic Property Finance, says: ‘It is unlikely that the availability of high-LTV mortgages is going to improve anytime soon.’
Ian Larkin, of Trussle, the online broker, is a lone optimistic voice. He believes there may be a thaw in the spring which could make it worthwhile to wait.
I just want to get on with it now. What should I do?
Make securing a loan a priority. You can arrange a loan yourself, but using a broker can help. Mr Harris says: ‘When a lender launches a flash sale of 90 per cent mortgages, the broker can ensure you make an application quickly.’
Mr Larkin adds that recent limited first-time buyer deals from the Coventry and the TSB were available through brokers only.
What paperwork is required?
What paperwork is required? A YOU will need ID, proof of address, bank statements and payslips. Mr Larkin adds: ‘If you’re self-employed, you must produce — at a minimum — two years’ accounts and prepare for plenty of questions about your business.’
Patience is vital. Hold-ups are inevitable as the Christmas period approaches.
My parents can help me. Will that reassure a lender?
Mothers and fathers are set to hand out £3.74 billion this year, according to Legal & General.
But Mr Harris warns that if you are benefiting from a loan rather than a gifted deposit from the Bank of Mum and Dad, lenders will factor the cost of repaying this debt into the size of the loan.
Mr Harris suggests the Barclays Springboard mortgage which allows you to use the family or friends’ savings as security. This cash must amount to 10 per cent of the property’s price.
‘The borrower doesn’t need any deposit and the helpers get their money back in five years, with interest.’ The rate on the loan is fixed for five years at 3.05 per cent.
What about Help to Buy?
If you have a 5 per cent deposit and are interested in a new-build home, Help to Buy may be an option. The Government lends you 20 per cent of the purchase price interest-free for five years (helptobuy.gov.uk) ensuring that you get a competitively priced mortgage.