First-time buyers are now able to get 95% mortgages again – in the event you apply?
Yorkshire Building Society has today (17 March) become the initial lender to relaunch 95% mortgages for first-time buyers.
Low-deposit mortgages disappeared almost entirely last spring because of the pandemic, but you will find signs that 2021 could be a far better year for first-time buyers.
Here, Which? requires a closer look at Yorkshire’s new deal and offer advice on whether buyers should make their move now or hold fire.
Yorkshire Building Society relaunches 95% mortgages
Yorkshire Building Society has today launched a brand new five-year fixed-rate 95% mortgage for first-time buyers.
The deal will be available through Yorkshire’s intermediary arm, Accord Mortgages, so you’ll need to apply via a mortgage broker.
The launch comes fourteen days before the start of the government’s new mortgage guarantee scheme, that will see some of the country’s biggest lenders offer 95% mortgages once again.
Yorkshire’s deal is priced at 3.99% and comes with a lb995 fee. It’s not available on flats or new-build houses, or to people currently furloughed. First-time buyers can borrow a maximum of 4.49 times their annual income.
The building society says the strict criteria is designed to manage demand and has warned that the deal could be withdrawn if it struggles to deal with applications.
Why is Yorkshire Building Society’s new deal significant?
Yorkshire Building Society’s new deal is essential because it should kick-start a flurry of low-deposit mortgages coming back to the marketplace.
First-time buyers happen to be hit hard throughout the pandemic, with two cuts to the base rate and economic uncertainty leading to lenders cutting nine in 10 of the 90% and 95% mortgages.
At the beginning of March this past year, there were 391 95% mortgages available on the market. But annually with that had reduced to just five – and none of those were widely available.
In recent years months, we’ve seen a substantial uptick in the number of 90% deals returning to the marketplace, but Yorkshire may be the first major lender to relaunch a 95% deal.
Will the mortgage guarantee scheme help first-time buyers?
In his Budget speech earlier this month, the Chancellor Rishi Sunak announced that the new 95% mortgage guarantee scheme would launch from April.
This scheme will see the government undertake some of the financial chance of high loan-to-value mortgages, giving lenders the confidence to relaunch their 95% deals.
Some from the UK’s biggest lenders, including Barclays, HSBC, Lloyds Bank, NatWest and Santander have registered, and much more are likely to follow.
Yorkshire Building Society states that it won’t be participating, but admits it launched its new deal in front of an expected influx of demand when the scheme launches.
Will Yorkshire Building Society’s deal begin a rate war?
With the guarantee scheme launching within weeks, Yorkshire Building Society has fired the starting pistol on what could be something of the rate war between your biggest lenders.
The price – 3.99% fixed for 5 years – looks high on paper, but it’s likely that buyers won’t immediately see significantly lower rates when other lenders join the party.
The recent return of 90% mortgages can give us an indication of what to expect.
When lenders first returned to the 90% market in December, the very best rate on a two-year fix was 3.24% and we saw major lenders ‘bunch’ their deals together by offering near-identical rates.
Since then, the number of deals has more doubled and also the best rate has fallen to two.99% – although that’s still 1.4% greater than the best rates seen before the pandemic.
The cheapest 95% five-year fix at the beginning of March 2021 was costing 2.9% – 1.09% less expensive than Yorkshire Building Society’s new deal.
Should first-time buyers wait until April?
Yorkshire Building Society’s 95% mortgage is likely to be very popular, but first-time buyers who aren’t in hurry may be better suppressing to see what happens when the mortgage guarantee scheme launches.
As we mentioned previously, it’s highly unlikely that borrowers might find rates plummet to anything like those seen prior to the pandemic, however the extra competition may lead to slightly cheaper deals.
Even if we don’t see lower rates, it may be that lenders compete in different ways – perhaps by offering their mortgages fee-free (Yorkshire Building Society charges lb995) or by providing cashback incentives.
Getting a home loan in 2021
If you’re thinking of trying to get a mortgage in 2021, it’s vital that you seek information before rushing in.
We’re here to assist with advice to guide you through the procedure for finding and trying to get a home loan.
First of, you should check out our mortgage calculators to discover how much you may be able to borrow and what your repayments might be.
You can take a look at our tips regarding how to improve your mortgage chances and the way to find the best mortgage company.
Finally, our guides on getting an agreement in principle and trying to get a mortgage will help you secure an offer and have a big step towards buying the first home.
