Save, make, understand money

First-time Buyer

Blow to first-time buyers as low deposit mortgages all but disappear

Paloma Kubiak
Written By:
Paloma Kubiak

Low deposit mortgage deals have plunged in the last six months as lenders tightened their criteria amid market volatility due to the coronavirus pandemic.

Borrowers with a 10% deposit had a choice of 779 mortgage deals at 90% loan-to-value (LTV) in March.

Just a month later in April, the deals had more than halved to 326 and by July, less than 100 were available.

And at the start of September, these borrowers have a choice of just 62, according to financial data site Moneyfacts.

For prospective homebuyers with just a 5% deposit, at the start of March there were 391 mortgage deals at 95% LTV. Six months later, this figure had plummeted to just 14.

At the other end of the scale, deals in the higher deposit, lower LTV bracket reduced, but not to the same extent. The Moneyfacts data revealed there were 604 products available to borrowers in March and by September, this had decreased to 443.

Just yesterday, banking giant HSBC announced a temporary withdrawal of its 90% LTV mortgages for new customers after experiencing a surge in demand as other lenders pulled their low deposit deals in recent weeks.

It followed a number of high street lenders with the move, including Nationwide, Barclays and Halifax. Other lenders such as NatWest and TSB have brought in restrictions for furloughed workers.

Despite the chancellor’s stamp duty cut, first-time buyers are still facing hurdles getting onto the property ladder as lenders play safe amid the uncertainty created by the coronavirus crisis.

Rachel Springall, finance expert at Moneyfacts, said: “It will be hugely frustrating for first-time buyers to see further contraction in the higher loan-to-value mortgage sector. Product availability has plummeted since March, where there were hundreds of deals to choose form, there are now very few.

“Those who had expected to get a foot onto the property ladder may now hold their plans, particularly if they only have a 5% deposit. This market movement highlights how vital it is for borrowers to act quickly to take advantage of a mortgage deal right now.”