HOW FIRST TIME BUYERS CAN SECURE LOW MORTGAGE RATES

With Help to Buy reportedly coming to an end in 2021, Countryside caught up with Ian Kelly, Director at Chartwell Mortgage Services Ltd, who explained why now is the perfect time for first time buyers to step onto the property ladder.

In most cases, a mortgage is the biggest financial commitment a person can make. It’s not a decision that should be taken lightly and requires research, thought and guidance to ensure that you’re getting the best possible deal for your own personal circumstances. The market can indeed be daunting, with the deposit being identified as the most difficult element for many first buyers.

First time buyers are typically looking to put down the least amount of deposit possible. However, there are a limited number of lenders who would be willing to lend at 95%, meaning buyers who are unfamiliar with the market may not be getting the best available deals on their mortgages.

Between a 10% and 15% deposit is usually what’s needed to purchase a home without Help to Buy, which is a significant amount of money for a new buyer. Of course, the bigger the deposit, the better the mortgage rate – so buyers with a 25% deposit would enjoy interest rates below 2%, or below 4% with a 10% deposit.

At Chartwell, 73% of first time buyers, who we worked with last year, took advantage of Help to Buy. In fact, the scheme has proven to be a welcome lifeline for first time buyers, as it means that only a 5% deposit is needed. Not only that, but the homebuying scheme has more than 14 lenders available, therefore creating more choice for buyers and allowing access to much greater rates. For example, two-year fixed rates are currently at an all time low, giving clients using Help to Buy, or who have a 25% deposit, access to rates below 1.5%! For those looking for a longer term, a five-year fixed rate provides homeowners with more security, as they are not subject to any short-term changes in the base rate.

Buyers with previous financial problems can also benefit from Help to Buy, as there are some lenders available through the scheme who are willing to lend to those without a perfect credit history.

In addition to this, recent stamp duty reforms have been great news for first time buyers as no Stamp Duty is paid on properties purchased below £300,000. Even second time buyers can still benefit from lower Stamp Duty, as you only start paying on the balance above £125,000 – this means that a property sold at £275,500 would only cost £3,750 in stamp duty fees.

But what happens when Help to Buy ends? In my opinion, there’s no clear view of what will happen after the 2021 deadline. After all, we’ve seen Help to Buy extended in some format over the last 10 years. The Government is keen to make homeownership more attainable for first time buyers, so it may be that they look to builders to make more use of affordable housing schemes.

Only time will tell what’s next for Help to Buy, so I would urge first time buyers to take advantage of it sooner, rather than later.