60% of first-time buyer mortgages withdrawn by banks

Banks have withdrawn 60 per cent of mortgages for small-deposit borrowers since the start of the year making it more difficult for first-time buyers to enter the property market, according to new findings. The number of loan-to-value mortgages available to customers at 95 per cent fell from 347 at the start of the year to 283 on September 23, the day Kwasi Kwarteng delivered his emergency mini-Budget.
Following the announcement of his plans to scrap the top 45 per cent rate of income tax and to cut stamp duty, the number declined further, dipping to 135 on October 21. This equates to a 60 per cent fall since the beginning of the year. Due to increased uncertainty in the market and a worsening economic climate, mortgage experts have noted that lenders have stopped offering their highest-risk products. This means home loans with small deposits have taken the biggest hit. Since Kwarteng’s budget announcement, several banks have strengthened their stress tests, with homeowners having to prove they can afford as much as 8.5 per cent on their mortgages.
 
These checks mean people must prove to their lender they can afford their mortgage if rates go up further. Commenting on the findings, Eleanor Williams, a financial expert at Moneyfacts, said: “First-time buyers are likely to feel the impact of the current circumstances keenly as the cost of living crisis shows no sign of abating.
 
“Inflated house prices may be a concern for those worried about stretching to meet a deposit, and these borrowers may find themselves having to dip into their savings pot to cover rising expenses, so not only may they be more likely to be looking for a low-deposit mortgage product, but they may also have concerns about meeting mortgage affordability requirements.”