First-time buyers hit hardest by Brexit, says Moneyfacts

Posted 14 September 2016 by Nick Parkhouse

New research shows that it is borrowers who rely on the largest deposits who have seen their choices reduced since the vote to leave the EU...

While the average price of a first-time house may have reached a 2016 high in June, the outcome of the EU referendum has hit potential first-time buyers more than any other type of borrower.

New data has revealed that the choice of mortgage deals available to borrowers with a small deposit has shrunk since the EU vote - the only type of mortgage to see a reduction in numbers.

Lenders withdraw 95% deals due to concern over housing market

New data has revealed that the choice of mortgages available to buyers with a 5% deposit has reduced since the decision to leave the European Union in June. In August, five first-time buyer mortgages were withdrawn from the market, reducing the number available from 243 to 238. 

This is in contrast to the choice of mortgages available to buyers with larger deposits which has actually increased in the last couple of months. For example, 10 new mortgages for borrowers with a deposit of 20% have been introduced since the vote.

Experts say that the reduction in 95% mortgage deals is due to lenders being increasingly nervous about the state of the housing market following the Brexit decision. High loan-to-value mortgages are more risky, as even small reductions in the values of homes can lead to negative equity.

Data from comparison service Moneyfacts and mortgage insurer AmTrust also suggests that lending to buyers with small deposits has been falling over time, despite the introduction of schemes such as Help to Buy. 

The research reveals that lending to first-time-buyers has been falling steadily since its peak in the second quarter of 2014. Loans to buyers with 5% deposits now make up just 2.5% of lending - down from 4.2% in the second quarter of 2014.

The reduction in choice for first-time buyers has led to concern that an unwillingness to lend might be limiting young people's ability to get onto the property ladder. 

Simon Crone, commercial director at AmTrust, says: "This will exacerbate fears that homeownership levels are in long-term decline because of the challenges first-time buyers face in accessing the market. Failure to support first-time buyers will impact the wider housing market by preventing people from moving up the housing ladder."

While the choice of first-time buyer deals may have fallen, the rates available are lower than ever with three leading lenders cutting their rates on these products in the last couple of weeks.

The Daily Telegraph reports that Aldermore has cut the rate on its Help to Buy mortgage from 6.09% to 4.98% while Virgin Money cut its five-year Help to Buy fixed rate to 4.39%. Nationwide has also launched a two-year tracker mortgage for first- and second time buyers at 3.59%.

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