First-time buyers say deals collapsed after banks backtracked on initial offer
The survey carried out by comparison website Comparethemarket in February found that one in five first-time buyers who tried to purchase a home last year saw their deal fall through.
As well as loan reductions, first-time buyers said they were asked to increase their original deposit size and were hit with a rise in the initial interest rate offered by the bank which prevented them from going ahead.
First-time buyers aren’t the only borrower category to struggle to raise mortgage finance during the pandemic.
Nearly one in five UK homeowners has been unable to remortgage their home since the pandemic began and face higher monthly mortgage payments as a result.
More than 40 per cent of those homeowners who were unable to remortgage said their application was rejected because they had lost their jobs, and 32 per cent said it was because they had been furloughed.
A quarter of homeowners thought their application was rejected because of a salary cut.
Fearful of remortgaging
Earlier this week, analysis by Legal & General found that moving onto the average standard variable rate of 4.1 per cent, after their deal expires, could increase annual mortgage repayments by more than £2,500 when compared to borrowers on the average two-year fixed rate at 2.65 per cent on a 90 per cent loan to value product.
L&G’s survey revealed that borrowers were fearful of trying to remortgage because their income and pandemic circumstances would be scrutinised.
More than half of those surveyed who plan to move deals said they were likely to stick with their current lender, with over a third of those saying this is the easiest way to secure a new deal.
Not everyone is having a tough time convincing the banks to lend them money, however.
Following the government’s decision to extend the stamp duty holiday until the end of June, followed by a three-month tapering off of the allowance, 65 per cent of first-time buyers and 75 per cent believe this will benefit them.
Mark Gordon, director of mortgages at Comparethemarket, said: “The pandemic does not yet appear to have had the decimating impact on house prices which many initially predicted; in fact, three-quarters of homeowners are confident they will sell their homes at the asking price.
“However, this does not mean that it is easy to get on, or move up, the property ladder. Household finances have been put under severe strain this past year and many families have found themselves in a more precarious position when it comes to their jobs and income.
“This can have a direct impact on mortgage repayments – often our largest monthly outgoing – and the ability to buy a property.”