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The Sun
19 hours ago
- Business
- The Sun
Mortgage scheme helping first-time buyers with small deposits to end in WEEKS – five other ways to get on the ladder
A MORTGAGE scheme that is helping first-time buyers get on the ladder is set to end within weeks. The mortgage guarantee scheme enables buyers to get a home with just a 5% deposit. It can be used to buy any type of home as long as you don't pay more than £600,000 for it. The scheme provides a guarantee that the Government will cover some of a lender's losses if a borrower can't afford to repay their mortgage and the home is repossessed. It's been available for buyers since April 2021 but it's scheduled to end on June 30, and there is no word yet on if or when a replacement will be launched. The Government said in February it would launch a "new, permanent, comprehensive mortgage guarantee scheme" that would "open the door to home ownership for more young families and hard-working renters". Brokers say it's possible the scheme won't be replaced - but don't be too disappointed just yet. Between the scheme's launch and the end of December last year, more than 53,000 mortgages were completed using it. Data released last week shows the total value of mortgages supported by the scheme was £10.7billion. But not every lender offering 95% mortgages has used the scheme, and many are still offering small or no deposit mortgages outside of the scheme. Justin Moy, managing director at EHF Mortgages, said the scheme may not be replaced because of renewed confidence in the mortgage market. The Sun's James Flanders explains how to find the best deal on your mortgage "This was originally designed to help lenders stretch to 90-95% Loan to Value at a time when confidence within the market was low, so this looks to be a positive step without causing too many ripples with lenders," he said. Pete Mugleston, mortgage adviser and managing director at Online Mortgage Advisor, said losing the scheme would be "mixed news" for first-time buyers. "On the one hand, the mortgage guarantee scheme was a useful way of helping first-time buyers get on the property ladder if they didn't have a large deposit," he said. "But, given that a lot of lenders are now offering mortgages with a 5% deposit and lower, losing it isn't as big an issue as it could have been. "As the government has not given any further details about the scheme it promised in February, we could be waiting a while before we hear anything." The Sun contacted the Treasury for comment. What other schemes are available? Even if the mortgage guarantee scheme is replaced, there are other Government schemes available for first-time buyers. You should look into each option thoroughly before going ahead with it and consider any disadvantages to the schemes. These are some of the options available... First Homes First-time buyers can get a home for between 30 to 50% less than its market value through the First Homes scheme. You can buy a new build home from a developer or a property from someone who's used the scheme before and is now selling. The scheme is only available in England and you'll have to be 18 or older to qualify. Your total household income must be £80,000 or less, or £90,000 in London. You'll also need to be able to get a mortgage for at least half the price of the home. Shared ownership If you can't afford all of the deposit and mortgage payments for a home that meets your needs, you could consider shared ownership. This is when you buy a share of the property and pay rent to a landlord on the rest. You'll also likely need to pay a service charge to maintain common areas shared between you and your neighbours. Buyers can usually get a share of between 10 and 75% of the home's full value. You can buy more of the home later on in a process called staircasing. However, some people who have used shared ownership have struggled to buy bigger portions of their homes due to being forced to pay increasing rents and service charges. Lifetime ISA People struggling to save for a deposit can get extra help from the Government by saving into a Lifetime ISA (LISA). You can save up to £4,000 a year into it and the Government will give you a free bonus worth 25% of whatever you save. You have to be between 18 and 39 to open a LISA and you can pay in and get the bonus until you're 50. It's worth knowing that if you withdraw your money before you're 60, it must be spent on buying your first home. If you withdraw it for any other reason you'll lose your bonus and also effectively pay a 6.25% penalty - so you'll end up with less than you put in. You should also be aware that you can only use a LISA on homes worth up to £450,000. Right to Buy This scheme was brought in during the 1980s and allows most council tenants the right to buy their council house at a discount. There are different rules for Wales, Scotland and Northern Ireland. You can make a joint application with up to three family members who have lived with you for the past 12 months. If you rent from a Housing Association you may also have the right to buy it at a discount under the Government's Right to Acquire Scheme. Deposit Unlock This lets you buy a new build home from any developer registered with the scheme as long as you have a 5% deposit. The scheme is available to both first-time buyers and home movers. It's available on new-build homes up to the price of £833,250. Deposit Unlock is currently available with participating lenders including Nationwide, Accord Mortgages and Newcastle Building Society. What do lenders offer? As well as Government schemes, some mortgage lenders have also been offering incentives for first-time buyers. For example, Skipton Building Society offers a 100% mortgage deal that allows you to buy a home without a deposit. A similar mortgage deal was recently launched by April Mortgages too. Accord offers a £5,000 deposit mortgage while other lenders have been slashing their affordability rules. Why you should be cautious with 100% deposit mortgages These types of mortgages can open doors for people who wouldn't be able to get on the housing ladder otherwise. Experts have generally seen the reintroduction of 100% mortgages as a positive thing and this deal from April Mortgages does have rigid lending criteria. But it's important to remember this deal won't be for everyone and they can be seen as quite controversial home loans. 100% mortgages mean you don't need a deposit - but it also puts buyers at higher risk of negative equity. This is when your mortgage is more than the total value of your home, which can happen if house prices fall. If you're in this position it can make it harder to remortgage, sell your home and get competitive rates from lenders. Typically they also have higher interest rates, making them more expensive. The general rule is that the smaller your deposit the higher your monthly mortgage repayments will be. Therefore because you won't have a deposit, your monthly repayments are likely to be more expensive compared with someone who did put down a deposit. You will need to be sure you can keep up with the payments and account for any potential financial shocks. 100% mortgages disappeared after the financial crisis in 2008, as they were seen a contributor to the sub-prime housing bubble and subsequent collapse.
Scottish Sun
19 hours ago
- Business
- Scottish Sun
Mortgage scheme helping first-time buyers with small deposits to end in WEEKS – five other ways to get on the ladder
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) A MORTGAGE scheme that is helping first-time buyers get on the ladder is set to end within weeks. The mortgage guarantee scheme enables buyers to get a home with just a 5% deposit. 1 The mortgage guarantee scheme has helped 53,000 home buyers get on the ladder Credit: Alamy It can be used to buy any type of home as long as you don't pay more than £600,000 for it. The scheme provides a guarantee that the Government will cover some of a lender's losses if a borrower can't afford to repay their mortgage and the home is repossessed. It's been available for buyers since April 2021 but it's scheduled to end on June 30, and there is no word yet on if or when a replacement will be launched. The Government said in February it would launch a "new, permanent, comprehensive mortgage guarantee scheme" that would "open the door to home ownership for more young families and hard-working renters". Brokers say it's possible the scheme won't be replaced - but don't be too disappointed just yet. Between the scheme's launch and the end of December last year, more than 53,000 mortgages were completed using it. Data released last week shows the total value of mortgages supported by the scheme was £10.7billion. But not every lender offering 95% mortgages has used the scheme, and many are still offering small or no deposit mortgages outside of the scheme. Justin Moy, managing director at EHF Mortgages, said the scheme may not be replaced because of renewed confidence in the mortgage market. The Sun's James Flanders explains how to find the best deal on your mortgage "This was originally designed to help lenders stretch to 90-95% Loan to Value at a time when confidence within the market was low, so this looks to be a positive step without causing too many ripples with lenders," he said. Pete Mugleston, mortgage adviser and managing director at Online Mortgage Advisor, said losing the scheme would be "mixed news" for first-time buyers. "On the one hand, the mortgage guarantee scheme was a useful way of helping first-time buyers get on the property ladder if they didn't have a large deposit," he said. "But, given that a lot of lenders are now offering mortgages with a 5% deposit and lower, losing it isn't as big an issue as it could have been. "As the government has not given any further details about the scheme it promised in February, we could be waiting a while before we hear anything." The Sun contacted the Treasury for comment. What other schemes are available? Even if the mortgage guarantee scheme is replaced, there are other Government schemes available for first-time buyers. You should look into each option thoroughly before going ahead with it and consider any disadvantages to the schemes. These are some of the options available... First Homes First-time buyers can get a home for between 30 to 50% less than its market value through the First Homes scheme. You can buy a new build home from a developer or a property from someone who's used the scheme before and is now selling. The scheme is only available in England and you'll have to be 18 or older to qualify. Your total household income must be £80,000 or less, or £90,000 in London. You'll also need to be able to get a mortgage for at least half the price of the home. Shared ownership If you can't afford all of the deposit and mortgage payments for a home that meets your needs, you could consider shared ownership. This is when you buy a share of the property and pay rent to a landlord on the rest. You'll also likely need to pay a service charge to maintain common areas shared between you and your neighbours. Buyers can usually get a share of between 10 and 75% of the home's full value. You can buy more of the home later on in a process called staircasing. However, some people who have used shared ownership have struggled to buy bigger portions of their homes due to being forced to pay increasing rents and service charges. Lifetime ISA People struggling to save for a deposit can get extra help from the Government by saving into a Lifetime ISA (LISA). You can save up to £4,000 a year into it and the Government will give you a free bonus worth 25% of whatever you save. You have to be between 18 and 39 to open a LISA and you can pay in and get the bonus until you're 50. It's worth knowing that if you withdraw your money before you're 60, it must be spent on buying your first home. If you withdraw it for any other reason you'll lose your bonus and also effectively pay a 6.25% penalty - so you'll end up with less than you put in. You should also be aware that you can only use a LISA on homes worth up to £450,000. Right to Buy This scheme was brought in during the 1980s and allows most council tenants the right to buy their council house at a discount. There are different rules for Wales, Scotland and Northern Ireland. You can make a joint application with up to three family members who have lived with you for the past 12 months. If you rent from a Housing Association you may also have the right to buy it at a discount under the Government's Right to Acquire Scheme. Deposit Unlock This lets you buy a new build home from any developer registered with the scheme as long as you have a 5% deposit. The scheme is available to both first-time buyers and home movers. It's available on new-build homes up to the price of £833,250. Deposit Unlock is currently available with participating lenders including Nationwide, Accord Mortgages and Newcastle Building Society. What do lenders offer? As well as Government schemes, some mortgage lenders have also been offering incentives for first-time buyers. For example, Skipton Building Society offers a 100% mortgage deal that allows you to buy a home without a deposit. A similar mortgage deal was recently launched by April Mortgages too. Accord offers a £5,000 deposit mortgage while other lenders have been slashing their affordability rules.
The Sun
27-05-2025
- Business
- The Sun
Warning for first-time buyers as sub-4% mortgage rates ‘hanging by a thread' after big inflation spike
EXPERTS are warning first-time buyers to act swiftly, as the cheapest mortgage deals could soon be off the table. Those looking to step onto the property ladder should consider locking in these rates now, with predictions suggesting they could be gone by the end of the week. 1 Home buyers have been in an ideal position lately as mortgage lenders have been slashing rates and offering incentives for first-time buyers. Leading lenders have been advertising rates below the golden number of 4%. But the UK's inflation rate soared higher than expected last week, hitting 3.5% - and that's expected to have a knock-on effect on mortgage rates. According to mortgage brokers, rates have already begun climbing once again, with warnings that more deals could vanish in the near future. Elliott Culley, director at Switch Mortgage Finance, told The Sun: "There only a few products remaining below 4%, and it looks like the majority of these will be gone by the end of the week." Meanwhile Justin Moy, managing director at EHF Mortgages, said that "we will likely see mortgage rates creep back over that 4% line in the coming days". Another broker, HTG Mortgages director Harry Goodliffe, said sub-4% rates are "hanging by a thread". Why are rates rising again? It's largely due to the higher-than-expected inflation figures last week. Inflation rose to its highest level since January 2024, driven by increased energy costs, road taxes and air fares. The figures have prompted markets to reassess how quickly and aggressively the Bank of England will cut its base rate over the next year. Mortgage Rates Evergreen That's because the Bank uses interest rates to control inflation. Markets had previously been pricing in four base rate cuts over the course of the year, taking the base rate to 3.5% by the end of 2025. Now the expectation is there could be three or fewer cuts. The base rate is currently set at 4.25%, and the Bank of England's Monetary Policy Committee will next review its level on June 19. But the inflation figures may mean the Bank of England is less likely to cut rates again. This in turn means that swap rates are higher. Swap rates reflect what markets expect will happen to interest rates in the near future. They're determined by factors including weather events, inflation, wars, tariffs and supply chain issues. Mortgage rates are heavily influenced by what is going on in the swap markets, and swap rates have been creeping up again over the past two weeks. As a result, several major lenders including HSBC, NatWest, Nationwide, Santander and Skipton Building Society have raised rates on some of their products. What's happening to the cheapest rates? The majority of mortgage lenders have increased their rates following last week's inflation data. Brokers say that if there continues to be less confidence in the market then rates could keep increasing. Rob Peters, principal at Simple Fast Mortgage, said the spike in inflation has "rattled the markets" and has put "real pressure on the sub-4% mortgage deals". "If this inflation trend continues, we will absolutely see some of those rates disappear, at least in the short-term," he said. However, he said they "won't vanish overnight" as there's still some room for lenders to compete with each other. Joseph Lane, founder of Mortgage Lane, agreed the sub-4% rates aren't gone entirely, but they're "becoming increasingly rare". "The recent rise in inflation has shifted expectations, and while some high street lenders may hold onto sub-4% deals for low-risk residential borrowers, these offers will likely be limited and short-term," he said. Meanwhile Nick Mendes, mortgage technical manager at John Charcol, said the recent trend of falling mortgage rates seems to be "pausing or even reversing". He said mortgage rates aren't expected to spike dramatically but the ultra-low deals we've seen recently are "looking increasingly precarious". What should you do if you're a first-time buyer? Mendes says that if you're looking to buy then you should explore your options "sooner rather than later". HTG Mortgages' Harry Goodliffe agrees that buyers should act quickly if they're looking to get on the ladder. "We've seen some of the best deals quietly vanish overnight, and more could follow," he said. "If you're sitting on the fence, now might be the time to jump. "The window for locking in a 3-point-something deal could be closing fast." It's worth noting that mortgage lenders still have plenty of incentives to help first-time buyers even if you're unable to lock in a rate soon. For example, April Mortgages and Gable mortgages recently launched a new 100% mortgage that requires zero deposit. Meanwhile other lenders such as HSBC and Halifax have been slashing their affordability rules to allow people to borrow more. Craig Calder, secured lending director at TSB, said: "If you are looking to get on the property ladder or purchase your next home, make sure you keep an eye on rates and talk to your bank or mortgage broker to get the best deal for your individual circumstances. "Remember, some lenders will let you secure a mortgage rate three to six months in advance with no obligation to take it if lower rates are available when you are ready to purchase." How to get the best deal on your mortgage IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time. There are several ways to land the best deal. Usually the larger the deposit you have the lower the rate you can get. If you're remortgaging and your loan-to-value ratio (LTV) has changed, you'll get access to better rates than before. Your LTV will go down if your outstanding mortgage is lower and/or your home's value is higher. A change to your credit score or a better salary could also help you access better rates. And if you're nearing the end of a fixed deal soon it's worth looking for new deals now. You can lock in current deals sometimes up to six months before your current deal ends. Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost. But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first. To find the best deal use a mortgage comparison tool to see what's available. You can also go to a mortgage broker who can compare a much larger range of deals for you. Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender. You'll also need to factor in fees for the mortgage, though some have no fees at all. You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you'll pay interest on it and so will cost more in the long term. You can use a mortgage calculator to see how much you could borrow. Remember you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks and looking at your credit file. You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements.
Yahoo
27-03-2025
- Business
- Yahoo
Mortgage rates to stay higher for longer amid high inflation
Homeowners are facing a new challenge as mortgage rates are set to remain elevated for an extended period, following confirmation from chancellor Rachel Reeves in her spring statement that inflation will average 3.2% this year. The announcement is a significant revision from the Office for Budget Responsibility's (OBR) earlier forecast of 2.6%, and it has raised concerns that interest rates will now decrease more slowly. The average rate for a two-year fixed mortgage stands at 5.19%, while five-year fixed deals average 5.31%, according to data from Uswitch. The Bank of England held its interest rate at 4.5% this month, after warning that global economic uncertainty has "intensified". This is the lowest level for rates in more than 18 months, following a reduction from 4.75% in February — the third such cut since August 2024. The main inflation measure, the Consumer Price Index (CPI), stood at 2.8% in the 12 months to February 2025, a slight decrease from the previous month. While this marks a significant drop from the peak of 11.1% seen in October 2022, it remains well above the Bank of England's target of 2%. Justin Moy, managing director at EHF Mortgages, told The i Paper: 'Those looking for a quick cut to mortgage rates will be disappointed by Wednesday's statement. With no additional support for homeowners, the mantra 'higher for longer' will rattle mortgage borrowers for the next few years. 'Confidence and stability still need to be proven by the government, the economy has a number of tax rises to swallow and if growth goes into reverse, that would be the trigger for deeper cuts to rates. But in the meantime, there isn't a lot of cheer for mortgage holders.' Read more: Key takeaways from Rachel Reeves' spring statement Critics were quick to respond, including shadow chancellor Mel Stride, who said: "Inflation, which was down to 2% bang on target on the very day of the last general election under a Conservative government. We are now told this year we'll be running at twice the level of the forecast under ourselves in 2024. This is going to mean prices bearing down on households and on businesses, right across the country, because of her choices." The spring statement also provided little relief for the housing market, with no new measures introduced to support buyers. There was no extension of the stamp duty concession, which is set to expire this week, and no new mortgage schemes for first-time buyers. Mark Harris, chief executive of mortgage broker SPF Private Clients: 'The spring statement was underwhelming as far as the housing market is concerned. 'The chancellor missed an opportunity to boost all-important transactions by extending the stamp duty concession or introducing some discount for downsizers. "She also did nothing for first-time buyers, with no incentives or assistance to get them on the housing ladder — a significant shame as first-time buyers are the lifeblood of the market and enable existing homeowners to move up the ladder." Read more: UK house price growth slows ahead of stamp duty changes Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: 'Our first wish was granted — the chancellor didn't do much, if anything, to deter existing activity in the housing market. 'It also seems a little unfair on those who have moved heaven and earth to take advantage of the stamp duty concession before it disappears but who may not make it, through no fault of their own. The deadline could perhaps have been extended for those transactions in solicitors' hands from the beginning of February as a small respite. "Looking forward, a broader review into the impact of stamp duty on the market and making it less of a deterrent, particularly at the first-time buyer end, would have been welcome.' This week, there were no major cuts to rates as lenders took a wait and see approach amid the spring statement. HSBC (HSBA.L) has a 4.07% rate for a five-year deal. This is unchanged from the previous week. For those who have a Premier Standard account with the lender, this rate comes in at 3.98%. Looking at the two-year options, the lowest rate stands at 4.12% with a £999 fee, again unchanged from the previous week. Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit. HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. The rates are much higher, however, with a two-year fix coming in at 5.39% or 5.08% for a five-year fix. This is because the rate someone can get will be determined by their financial situation and the size of their deposit. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky. NatWest (NWG.L) has a five-year deal coming in at 4.12% with a £1,495 fee, which is unchanged from the previous week. For a two-year fix, the cheapest deal comes in at 4.15%, also unchanged. In both cases, you'll need at least a 40% deposit to qualify for the rates. At Santander (BNC.L), a five-year fix comes in at 4.10%, unchanged from the previous week, with a £999 fee, assuming you have a 40% deposit. For a two-year deal, customers can also secure a 4.15% offer, with the same £999 fee, which is also untouched. Read more: How to protect over £370,000 in savings from tax In addition to maintaining its current rate offerings, Santander has expanded its product range to support first-time buyers. The bank has introduced new fixed-rate deals for first-time buyers with loan-to-value (LTV) ratios ranging from 60% to 95%. These include options for two-, three-,five- and 10-year terms, as well as a two-year tracker mortgage. Notably, these new deals come with flexible product fees — either £999 or £0 — depending on the option chosen. Santander has also introduced new mortgage products tailored to first-time buyers with large loans, featuring two- and five-year fixed-rate deals at 60% LTV, albeit with a higher £1,999 product fee. Additionally, the bank is catering to first-time buyers purchasing new-build properties with the launch of new range of 60% to 95% LTV three-year fixed deals. Options available with a £999 or £0 product fee. A five-year fix at Barclays (BARC.L) comes in at 4.06%, which is untouched from the previous week. For "premier" clients this rate drops to 3.99%. When it comes to two-year mortgage deals, the lowest you can get is 4.11%, also unchanged from last week's deal. Barclays has also launched a new mortgage proposition designed to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively "boost" the amount that can be borrowed towards a property, without needing to lend or gift money directly or provide a larger deposit. Read more: Best credit card deals of the week Under the new scheme, a borrower's eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375. However, with Mortgage Boost, if a second person — such as a parent — joins the application, the total borrowing potential can rise substantially. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000. Nationwide (NBS.L) is offering a five-year fix at 4.34%, which comes with a £999 fee and requires a 40% deposit. This is unchanged from last week. Nationwide offers a two-year fixed rate for home purchase at 4.34% with a £999 fee — also for borrowers with a 40% deposit. Again, unchanged from the previous week. Halifax, the UK's biggest mortgage lender, offers a five-year rate for 4.17% (also 60% LTV), which is higher than last week's 4.12%. The lender, owned by Lloyds (LLOY.L), has a two-year fixed rate deal coming in at 4.06%, with a £999 fee for first-time buyers, which is lower than the previous 4.15%. Read more: How to negotiate house prices It also offers a 10-year deal with a mortgage rate of 4.78%. The lender has announced the launch of a new 1.5-year fixed-rate remortgage product in response to growing demand among borrowers for shorter-term deals. Shorter-term fixes offer certainty over monthly payments while also allowing households to switch to a new deal sooner to capitalise on lower rates. With sub-4% mortgages basically off the market unless you're a premium client, prospective homeowners do not have a lot of reasons to smile when it comes to finding a good deal. Barclays currently has the cheapest deal on the market for a five-year fix, and Halifax has the cheapest for a two-year deal, both at 4.06%. However, they both require a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal. Given the average UK house price sits at £366,189, a 40% deposit equates to about £147,000. A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s. Read more: UK house prices climb £10,431 amid demand for bigger homes Lender April Mortgages is offering buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage. The company, which is part of an independent Dutch asset manager DMFCO, has interest rates starting at 5.20%, with an application fee of £195. Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income, in an effort to support more borrowers on to the housing ladder. Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings, with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings. Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England's base rate has been passed on by banks and building societies. With 1.8 million fixed mortgage deals set to end in 2025, according to UK Finance, many homeowners will be hoping the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely be rooting for rates to remain at or near their current levels. Read more: 10 home upgrades that don't need planning permission What are green mortgages and are they the future? How rising house prices can impact your finances
