Last month we commented on the withdrawal of low deposit mortgages for first time buyers. A rumoured extension to Help to Buy did cause some optimism, but things just got worse for those struggling to get on the ladder.
Before the pandemic, first time homebuyers were faced with a straightforward, if challenging, choice. Save the deposit asked by the lender, look to the Help to Buy scheme or head to the bank of mum and dad.
When the property market reopened, they found that things were not as they were. Now there was a new rule book.
The first move by the lenders was to withdraw their low deposit mortgages. At the beginning of the year, there were over 700 mortgages available with a deposit of 10% or less. Then there were just 70. The number of mortgage products currently available with a 5% deposit is 20.
Some lenders have brought back their 10% deposit mortgages, but they come with strings attached.
According to major estate agent Savills, in 2019 around 40% of first time buyers were helped by the bank of mum and dad. That wasn't a problem last year. Now, apparently, it is. Having brought back their 10% deposit mortgage, Nationwide now stipulate that the buyers must have funded 75% of the deposit from their own savings.
The idea of a new new home has also taken a knock. The same lender now declines to advance mortgages on properties less than two years old.
The light at the end of the tunnel was Help to Buy - government backed equity loans to enable buyers with low deposits to make up the difference between what they had available and what the mortgage providers would advance. The scheme has helped many first time buyers, but is effectively in wind-down mode and heading for expiry. Rumours were floated that Help to Buy would be extended.
It was. By two months, to make up for late completions due to Covid delays.
Here is the Help to Buy conundrum. The scheme only applies to newly built homes. If other lenders follow Nationwide's lead, they won't give mortgages on newly built homes. Where does that leave Help to Buy? In a mess, basically.
It was an uphill task for first time buyers before. They're facing a mountain now.