More bad news for first time buyers

With interest rates having fallen twice over the past few months, and with predictions that house prices could plummet over the course of the year, many potential first time buyers may have thought that this was their opportunity to get onto the property ladder at last. However, it appears that the problems for first time buyers are not over yet, with an increasing number of lenders now making it more difficult and more expensive for this group to get an affordable mortgage.

A recent report has shown that many lenders have changed the criteria when it comes to mortgage lending, and many are now looking for a far higher deposit than the traditional 5% in order to provide consumers with access to more affordable mortgage rates. First time buyers have no previous property from which to take equity to put down as a deposit, so raising anything more than the 5% - and in some cases even raising the 5% - can prove difficult or even impossible for some.

However, it seems that many would-be first time buyers may now have to find the whopping deposits or get stung by extortionate interest rates, with many lenders now reserving their most competitive rates for those that can put down between 10% and 25% by way of deposit. Some lenders are even asking for 40% upfront in order to access their most competitive rates.

One industry professional stated: ‘Banks are clearly now engaged in more active risk-pricing when it comes to mortgage lending, with riskier borrowers failing to benefit from the fall in expectations of policy rates. For first-time buyers this could clearly be a problem.’

Recent additions:

•  Severe lending cutbacks from smaller building societies
• Ongoing problems in the mortgage sector
• Fast action needed to get a good deal on a mortgage
• Number of mega-mortgages available slashed
• More interest rate cut needed states housing developer

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