First Time Buyer Mortgages

Traditionally, first-time buyers have had a reasonably easy time of it, with a series of excellent offers such as free fees and discounted rates. This has not really changed recently with the boom in the housing market. But, due to the increasing price of properties, the number of first-time buyers is decreasing. In addition, a decade ago, first-time buyers were looking to commit to mortgages of no more than three times their annual salary; in 2007, the average amount of a first-time buyers mortgage is now typically 4.5 times their salary, in a bid to get their foot onto the property ladder.

With the market changing so dramatically, the requirements of first-time buyer mortgage offerings have also had to change to reflect these new needs. Crucially, first-time buyers are waiting longer before they enter the property market in a bid to reduce the value of the mortgage necessary, by saving towards a larger deposit.

Concern exists amongst many first-time buyers that the property market may have reached an all time high and that house prices are indeed set to crash markedly, in the near future. The debates on this subject appear never ending and it is up to the individual purchasers to decide on the merits of the arguments. Nevertheless, what is important is that the confidence in the property market amongst first-time buyers is at an all-time low. Consequently, first-time buyers are keen to avoid the possibility of getting into a negative equity situation, preferring to save a larger deposit rather than taking a mortgage for 100% of the current value of the property.

This market move has meant that 100% or more loan-to-value mortgages are not as common as they were; this has resulted in a drop in the options for first-time buyers who need a large mortgage. Although these mortgages are available, first-time buyers should be aware that the mortgage itself will only be approximately 95% of the value of the property and the rest will be financed through a personal loan at a higher interest rate, but not secured on the property itself. This avoids the likelihood of a negative equity situation, although it could result in the owner having an outstanding loan if they were to sell before the value of the property rises above the total value of the debt associated with the property. However, it does effectively leave buyers in the position of having mounting unsecured debts, which may not be desirable when combined with large mortgage payments.

First-time buyers have a lot more to worry about than simply the value of the property and the likelihood of a price crash. Competition remains fierce when it comes to affordable properties and first-time buyers need to get their finances in order before they embark on their first purchase.

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