18 February 2011

Still tough for First Time Buyers...or is it?

First Time Buyers are hitting the press again, with reports from rightmove.co.uk suggesting that first timers now account for less than a quarter of all potential house purchases in the UK.

However, lenders are beginning to take on this problem. Many are launching products specifically aimed at First Time Buyers and some of the major builders are also looking at ways to get people on to the property ladder. Even the government has recognised that there is an issue and is holding talks with Lenders, Builders and other industry leaders this week to try and find a solution. Although, with the recent major financial cuts across the country, one wonders how this area might be financially supported.

First Time Buyers will usually require a minimum 10% deposit. Some lenders will allow a 5% builders deposit, but this must be confirmed as a gift and non repayable. Some lenders will allow the deposit to come as a gift from the Bank of Mum and Dad, again as long as it is confirmed this is non repayable.

Rates have reduced lately, with the likes of Santander, NatWest, and a few others lowering interest rates on their 90% products in a bid to assist. However, you are still looking circa 6% interest rates for a fixed rate and most lenders now require the mortgage repayment method to be capital and interest, rather than just interest only for those borrowing more than 75% of the property value.

Some lenders will allow a loan of up to 95% of the property value, if parents or another immediate family member will act as guarantor. Those guaranteeing, in the main, will need to show evidence of affordability for both their current residential mortgage and the one they are intending to guarantor.

Even some Building Societies are offering 90% loans, with possibly higher levels to existing long term account holders. Customers, in the main, need to be located near to the branch of the lender. Variable and tracker rates are also being offered (circa 4.5%) depending on the lender. Income multiples tend to be slightly restrictive though with some offering 2.50 to 3 x joint income, or up to 3.75 x single income. However, they are showing a willingness to assist First Time Buyers and in the current market, that can only be a good thing.

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