How much do first-time buyers need for a 10% house deposit?

Banks have withdrawn the majority of their low-deposit mortgages within the wake of the COVID-19 outbreak, resulting in the gap in cost between 90% and 95% deals growing significantly.

This means that to have a great interest rate, first-time buyers may now need to either stump up a 10% deposit or bide their time until more deals go back to the marketplace.

Here, Which? explains how much you’ll have to save to purchase a house having a 90% mortgage in your area and how a larger deposit can impact the size of your home loan repayments.

What’s happened to 90% and 95% mortgages?

Banks and building societies have withdrawn more than half of the mortgages because the start of March, because they grapple using the effects of the coronavirus outbreak.

These cuts have been sparked by a series of challenges, such as the government’s stay-at-home measures banning in-person mortgage valuations, bank resources being stretched due to loan payment holiday applications and two emergency cuts towards the Bank of England base rate creating uncertainty.

Low-deposit deals happen to be worst affected, with nine in 10 90% and 95% mortgages withdrawn in the space of just 8 weeks.

When will small deposit mortgages return?

The property market has now reopened in England and mortgage valuations are recommencing, but it’s early days in terms of mortgage numbers rising again.

The quantity of 90% deals available on the market has grown by 11 within the last Ten days, but 95% deals are yet to see any change.

Where do first-time buyers need the biggest deposits?

As people begin exchanging homes again, it’s likely more products will return over the coming weeks and months. The number of 90% mortgages will probably rise first, due to the fact 95% loans are riskier for lenders.

If you’re currently saving for a mortgage deposit, the total amount you’ll have to pay to get a 90% mortgage varies significantly depending on where you’re looking to purchase a home.

New data from Rightmove shows that savers within the North East only require lb10,034 for a 10% deposit, while buyers working in london require an eye-watering lb47,757. The general average for England is lb24,189.

The interactive map below shows how much you'll need in every region for a 10% deposit, along with the current average asking price in every area.

How much does it cost to purchase a house within my city?

Rightmove also assessed deposits and property prices in 20 cities around England.

It discovered that in two cities, Bradford and Hull, first-time buyers might take out a 90% mortgage with a deposit of under lb10,000.

Outside of London, first-time buyers in Brighton need the biggest deposits, with lb30,960 necessary to secure a 90% mortgage.

How much am i going to save with a 10% deposit?

Generally speaking, bigger deposits mean lower mortgage rates of interest and, thus, lower monthly repayments.

The gap in cost between the best-rate 90% and 95% mortgage is generally in the region of 0.7%-1%.

On your day the base rate dropped for the first time (11 March), the gap was 0.97%, however this has now widened to 1.3%, meaning 90% mortgages are considerably cheaper than 95% deals.

How do repayments compare?

At 90% LTV, HSBC provides a two-year fix with an initial rate of 1.79% along with a fee of lb999.

The cheapest comparative 95% mortgage comes from Nationwide, at 3.09% and with a fee of lb999.

The chart below shows how your monthly repayments during the two-year promotional period could differ based on whether you have a 5% or 10% deposit.

Based on buying a lb200,000 property with a 25-year mortgage term, the cheapest 90% mortgage would cost you lb165.25 per month less than the best-rate 95% loan.

Do bigger deposits always mean cheaper rates?

Going down a LTV bracket makes a difference to your repayments, but once you decide to go below 90% the savings are smaller.

There are currently 158 deals available for first-time buyers at 85% LTV, meaning those with slightly bigger deposits have much more to choose from.

The cheapest two-year fixed-rate mortgage at 85% LTV is priced at 1.49% from HSBC – that’s just 0.3% less than the best 90% rate.

This means the monthly saving in cases like this would be lb65.58 a month, as shown below.

Should I buy my first home this season?

It’s a confusing time to buy your first home and although the home market in England has reopened, it remains to be seen what impact COVID-19 will have on house prices.

This means it’s even more important than ever before to complete your research and be sure you’re not rushing in or overpaying for your first property.

It’s also worth taking advice from a large financial company in your borrowing options, as the situation is evolving on a weekly basis.

The market likely to be volatile for some time, so you may not see returns in terms of house price growth for a while if you purchase now. With this in mind, think about your long-term plans before you start your research.

How to save for any mortgage deposit

Whether you’re near to buying your first home or you’ve just started saving, we’ve got a whole lot advice that will help you boost your deposit.

If you’re in the last stages of saving, check out our guide around the basics of saving for a mortgage deposit, and think about the benefits and drawbacks of opening an eternity Isa, which offers a 25% bonus on your savings.

If you’re just a little further down the road, we can help you find out how you can enhance your mortgage chances and eventually apply for a mortgage.

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