How first time buyers can still get on the property ladder

Though some lenders have temporarily withdrawn their mortgages for first time buyers, there are still options available.

This particularly applies for those who have support from the Bank of Mum and Dad.

Nationwide Building Society recently withdrew its 90% and 95% mortgage deals and according to financial website Moneyfacts.co.uk, the number of deals available at a 95% LTV dropped overnight by almost half in the middle of June, falling from 33 available to just 16 deals.

However, this number is gradually starting to tick up again as lenders start to re-introduce mortgages for those with small deposits.

If you have family or friends prepared to help, this can make it easier to get onto the property ladder as a first time buyer. Here’s what you need to know.

Mortgages allowing parents to retain their savings to help first time buyers

There are several mortgages available which are designed to factor in financial support from parents and which don’t necessarily involve them handing over their savings.

These include deals which enable buyers to take out a mortgage without a deposit, provided parents keep a percentage of the property price in a savings account, and mortgages that allow parents to borrow against equity in their home.

For example, with a Barclays Family Springboard mortgage, buyers can borrow either 95% or 100% of the property value as long as a family member agrees to put down 10% of the property’s value in a Barclays savings account for three years as security.

At the end of the three years, the money will be returned to the family member, as long as all mortgage payments have been made on time. Halifax offers a Family Boost mortgage which works in a similar way, although it’s temporarily unavailable for new applications.

The Family Deposit Mortgage to help first time buyers

With Nationwide Building Society’s Family Deposit Mortgage, parents can borrow against some of the equity in their home, and then give this money to the home buyer for them to use it as a deposit. The cash must be a gift rather than a loan.

Family Building Society also offer mortgages which enable family members to provide first time buyers with financial support and has just re-introduced this type of deal, after temporarily removing it.

The 95% loan-to-value mortgage is designed for first time buyers who have family that are prepared to pledge some of their savings – which can also be used to offset part of the mortgage balance and reduce monthly payments – or by providing a charge on their own housing equity.

First time buyers can try to build a bigger deposit

If you don’t have family support and aren’t able to buy with a friend to help share costs, your best bet is to try and save as much as possible towards your deposit.

First-time buyers who are able to save up a bigger deposit, say 10% rather than 5% of the property value, will have a much wider range of mortgage options available to them at better rates – although of course this is often easier said than done.

The good news is that some lenders are gradually re-introducing deals for those looking to borrow up to 90% of the property value, with Yorkshire Building Society last week launching a five-year fixed rate deal at 2.99% with a £495 arrangement fee and a free valuation.

It is also offering another 90% deal at 3.09% which has no arrangement fee but comes with a free valuation.

First time buyers and the Lifetime ISA

One way to boost the amount you save is by saving into a Lifetime ISA. You can contribute up to £4,000 a year into this type of account and the government will add a 25% bonus every month to any contributions you make, paying in up to £1,000 a year on your behalf.

The Lifetime ISA is available to anyone aged from 18 up to 40 who wants to buy their first home or save for retirement, or both.

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