5% Mortgage Rates for First Time buyers

First-time buyers can purchase their first home with a 5% deposit

Monday 19 April, 2021

Burcu Kaya, Financial Adviser in Enfield and Cheshunt, Hertfordshire reviews the options for anyone wanting to purchase their first home with either a 5% or 10% mortgage deposit.

Mortgage lenders now offering mortgages to first-time buyers with a smaller deposit

When the pandemic first hit in the early part of last year many people noticed, especially first-time buyers, that 5% mortgages ceased to exist, and most lenders weren’t even offering mortgages to anyone with a 10% deposit. Fast forward to 2021 and the mortgage market is looking very different. We are seeing a variety of mortgage products available for anyone with a 10% deposit. Several mortgage lenders are now also willing to offer mortgages for first-time buyers with a 5% deposit, following the government’s announcement in March. 

Mortgage lending is improving for those with a 10% deposit

The mortgage market is certainly not back to pre-pandemic levels as the mortgage lending rules are stricter and tougher, but we are making significant progress. I hope by the end of the summer things will have improved further. Now anyone reading this with a 15% deposit or more doesn’t have to worry as the interest rates at this level are still fairly low and the mortgage lending criteria is not as tough at these levels. If you have a 10% deposit there are signs of an improvement in the mortgage lending market, it is fairly stable, but lending is stricter. However, most of the mortgage lenders who operated back in 2019 are now offering mortgage products.  

More first-time buyers with 5% deposits are able to purchase their first home

It is for first time buyers with only a 5% deposit where there has been significant change. The 5% help to buy scheme for new builds is available, and it is set up similar to the pre-pandemic version, with the government loan element at 20% or 40%. Pre-pandemic mortgage lenders offered normal 5% mortgages for any properties at mortgage lending rates below 3%, which in retrospect offered excellent value. Unfortunately, we currently don’t have many mortgage lenders offering these products, rates are higher and there are stricter criteria in place. However, there is no reason why anyone with a 5% deposit should be put off purchasing their first home.  It’s just worth emphasising that you need to plan and seek mortgage advice as soon as you decide to purchase a property. Call one of our qualified mortgage brokers on 01707 872000 so you know exactly what you can afford to buy and what type of mortgage you can apply for. We hope as we head towards the summer, we will see rules and legislations relax in relation to 5% deposits. We also hope that interest rates on mortgage products will fall as they have done on products with higher deposit levels.’  

In Summary...

Overall, the introduction of 5% mortgages is a welcome breakthrough and is good news for many first-time buyers. Subsequently this will have a positive effect on the provision of 10% deposits too, as we expect things to improve as we head towards the summer. Although there are stricter mortgage lending criteria for 5% deposits our Thomas Oliver mortgage broking team can assist you with the mortgage process. The key is to always seek mortgage advice early from an experienced mortgage broker, and plan appropriately. At Thomas Oliver, we pride ourselves on helping people purchase their home, especially first-time buyers, so please get in touch for a mortgage consultation at our expense. We can help you purchase your dream property by providing appropriate mortgage advice for your personal circumstances.

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