Cheap borrowing and a levelling of house prices means it’s a buyer’s market for First Time Buyers

13 May 2019

House price growth across the country continues to slow down with some properties dropping in value. First Time Buyers need to take advantage of Help to Buy ISAs now before they close to new savers on 30 November 2019.

For first time buyers looking to purchase their first home, Defaqto, the financial information business, believes that the conditions are ripe now to take that first step onto the property ladder.

With UK property price growth slowing in some areas, the number of cheap High Loan-to-Value mortgages on the market increasing, and the government’s Help to Buy ISA scheme coming to an end later this year, now could be the time for first time buyers to make the most of the present market conditions.  

High Loan-to-Value (LTV) mortgages, where a borrower can buy a house with a small deposit such as 5% of the value and borrow the remaining 95%, are typically used by first time buyers to get on the housing ladder.  Defaqto has found that interest rates have been falling for 95% LTV mortgages.  A year ago, the average interest rate on a two year fixed rate mortgage was 3.95% and today it is 3.23%.

Top 10 best 2 Year Fixed Rate First Time Buyer 95% LTV products

Provider

Product

Initial Rate Payable

Fees Payable

Barclays

2yr 2.80% Fixed LTV 95%

2.80%

0

Post Office Money

2yr 2.80% Fixed LTV 95%

2.80%

0

West Bromwich Building Society

2yr 2.84% Fixed LTV 95%

2.84%

0

HSBC

2yr 2.89% Fixed LTV 95%

2.89%

0

Virgin Money

2yr 2.92% Fixed LTV 95%

2.92%

0

Leek United

2yr 2.95% Fixed LTV 95%

2.95%

0

Bank of Ireland (NI)

2yr 2.98% Fixed LTV 95%

2.98%

0

Monmouthshire Building Society

2yr 2.99% Fixed LTV 95%

2.99%

0

Santander

2yr 2.99% Fixed LTV 95%

2.99%

0

Tesco Bank

2yr 2.99% Fixed LTV 95%

2.99%

0

 

In addition, first time buyers can take advantage of a weakening housing market.  Figures out from The Royal Institution of Chartered Surveyors (RICS) in March 2019 show that UK house sales continue to weaken with the number of properties coming onto the market falling for the past eight months consecutively; making this a buyer’s market for first time buyers with a mortgage in place and no current property chain commitments. 

First time buyers can also take advantage of the government’s Help to Buy ISA scheme, but they will need to hurry as it is closing to new savers from 30 November 2019. The Help to Buy ISA was set up by the government specifically to help first time buyers purchase their first home.  All savings are tax-free and the government will donate an extra 25% towards the amount saved, up to a maximum of £3,000 per person (£6,000 saved, £200 per month).  If two people plan to buy a property together and are both first time buyers then the government bonus is up to £6,000, but this does mean saving £24,000. Those already saving into a Help to Buy ISA have until the 1 December 2030 to use their savings to buy their property.

Best Buy Help to Buy ISAs

Provider

Product

Headline Interest Rate

Minimum Initial Deposit

Tipton & Coseley

Help to Buy ISA

2.95%

£10

Darlington Building Society

Help to Buy ISA

2.80%

£1

Barclays

Help to Buy ISA

2.58%

£1

Buckinghamshire Building Society

Help to Buy ISA

2.50%

£1

Nationwide Building Society

Help to Buy ISA

2.50%

£1

NatWest

Help to Buy ISA

2.50%

£1

Ulster Bank

Help to Buy ISA

2.50%

£1

Virgin Money

Help to Buy ISA Issue 4

2.50%

£1

Katie Brain, Insight Analyst at Defaqto, comments: “Buying a home is an expensive undertaking and for many years we have seen that first rung of the property ladder move further out of the reach of first time buyers.  Now, with stalling house prices and cheaper borrowing, we are entering a period of opportunity for buyers looking to make their first home purchase.  However, if they wish to take advantage of the government’s Help to Buy ISA scheme, they are going to have to hurry.  Securing a 25% bonus from the government is not to be sniffed at but this really is a ‘use it or lose it’ moment for first time buyers. 

“For those looking to get a mortgage, it is important to do your sums and check exactly what you can afford to borrow. While interest rates are low, an increase of just 1% can add hundreds of pounds to a monthly repayment and thousands to the overall cost of a home. It’s important to factor in what an increase could mean for your mortgage and whether you can afford it. If you need advice, talk to a qualified mortgage adviser who can recommend the best product for your needs.”

 

ENDS

About Defaqto:
Defaqto is a financial information business, helping financial institutions and consumers make better informed decisions.

Our independent fund and product information helps banks, insurers and fund managers with designing and promoting their propositions. We analyse around 43,000 financial products in the UK. These products change on a daily basis, and our customers need help with keeping track of this.

We have been doing this for over 25 years, and have over 60 analysts spending 400 hours a day monitoring the market. They ensure that the information we provide is accurate and up to date. Our experts have done all the hard work so that financial institutions and consumers can make better informed decisions.

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