West Sussex County Times : 2020-07-09

The Guide : 52 : 52

The Guide

Homes 52 HORSHAM www.wscountyti­mes.co.uk Thursday,July9,2020 Thursday, July 7, 2020 wscountyti­mes.co.uk/property cliff.palmer@jpimedia.co.uk / 01903 282350 / 07803 506138 First-time buyers hit as banks change mortgages due to coronaviru­s crisis WHY ARE LENDERS WITHDRAWIN­G MORTGAGES? WHO DOES THIS SITUATION AFFECT? Five lenders have withdrawn all of their 90% and 95% deals in the last three weeks in response to the coronaviru­s lockdown. This has predominan­tly impacted the first-time buyers market, where people typically benefit from higher loan-to-value (LTV) mortgage deals. Nationwide became the latest lender to pull its 90% and 95% LTV mortgages this week. It follows Virgin Money, Accord Mortgages, Yorkshire Bank and Clydesdale. Only 16 different mortgage products remain for people borrowing 95% of their home’s value. This is down from 391 at the beginning of March, according to financial informatio­n group Moneyfacts. of options. Firstly, there are still mortgage deals available. As mentioned above, there are 16 deals available for borrowers with 5% deposits, but this expands to 75 deals for those with a deposit of 10%. There is also significan­tly more choice for people with a 15% deposit, with 341 different mortgage products currently available. If you are struggling, it may be worth speaking to an independen­t mortgage broker who will be able to help you search the entire market to find the best deal for you. to purchase a home with just a 5% deposit. With the Help to Buy scheme, the government tops up a 5% deposit with a 20% equity loan, allowing buyers to qualify for a 75% LTV mortgage. You could raise money for your deposit by increasing your savings or borrowing from family members. Mortgage lenders are being more cautious in light of the impact of the coronaviru­s pandemic on the UK economy. On the one hand, lenders are concerned that a pause in economic growth and a rise in unemployme­nt could cause house prices to fall. This could leave borrowers in negative equity (when the value of their home is less than the value of the mortgage they are repaying). Borrowers with smaller deposits are seen as being at higher risk of falling into negative equity because they have higher monthly deposits. In response to these factors, some lenders are withdrawin­g higher LTV mortgage products. This situation comes as upsetting news for first-time buyers aspiring to get on to the property ladder with a deposit of just 5% or 10%. It could also cause problems for those who bought their first home two years ago, and are currently looking to remortgage with a small deposit. House price growth has been muted in some regions over the last two years. As a result, these prospectiv­e buyers are unlikely to have built up a sufficient equity stake to be able to qualify for an 85% mortgage deal. WHAT IF I NEED TO REMORTGAGE? The situation is more complex if you are looking to remortgage, but again, there is no need to panic. If you cannot switch to a new deal when your existing one comes to an end, you will automatica­lly be put on to your lender’s revert rate. This is usually known as the standard variable rate (SVR). WHAT ABOUT HELP TO BUY? If you are looking to purchase a newbuild property, you could consider using the government’s Help to Buy scheme. This initiative allows people I ONLY HAVE A SMALL DEPOSIT, WHAT SHOULD I DO? Do not panic. You still have a number

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