It's a tough time – possibly the toughest in a generation – for getting first-time buyer mortgages. The news of major and minor lenders pulling low-deposit mortgage deals from the market keeps coming, with options for those who don't have much saved up for a house dwindling at a worrying rate.
- Learn to secure the best mortgage rates for your home
- Get the latest information on house prices 2020
And yet, could this situation with mortgages be a blessing in disguise, at least on some level? And what can first-time buyers do if they really can't save up for a bigger deposit any time soon?
Speaking on ITV, Money Saving Expert Martin Lewis explained why he thought lenders restricting low-deposit mortgages was sensible. The finance expert and presenter reiterated what he has 'always' said about 95 LTV mortgages, saying that they have 'awful' rates, and has advised first-time buyers to try and save a bigger deposit regardless of current lending conditions.
Lewis also cautioned against 90 LTV mortgages if it's at all possible to avoid them, because house prices may still come down significantly, leaving home owners in negative equity, and potentially 'stuck' in a property for the next decade or longer. However, he does point out that if you've found a property that you really like and will stay in long-term, then you need to speak to a mortgage broker, because some lenders are still offering mortgages with 10 per cent deposits.
It's important to bear in mind that negative equity, while much feared, is only truly a problem is you're planing on selling. If you've found somewhere you won't be moving from for the next 10 to 15 years, and the difference in deposit is what separates you from buying the house, then you should try and buy now, with the deposit that you do have.
Having said that, lower LTV mortgages have always offered better rates to home owners, so if you can hold off at all and save more, then do that instead. Saving while renting is tough, but you should look into the Lifetime ISA scheme, where the government will contribute 25 per cent towards your savings, up to £1,000 a year, until you're 50. This could make a significant difference to how much you have saved up for a deposit, and the money can go towards any home up to £450,000 in value, not just a new build.
Consult a mortgage broker
You need all the help you can get, and a broker is much more likely to get through to the lender where you as an individual may get lost in a sea of applicants. A broker will also be able to advise you on your realistic options, helping you avoid mistakes and rejections.
We've teamed up with the online mortgage broker Habito, who can help you with the entire mortgage application process. Use their free mortgage comparison tool below to get an idea of how much you could borrow.