Few real deals for first-time buyers

Reports of an apparent race to attract first-time buyers by mortgage companies have been met with widespread scepticism by property professionals.

First timers with small deposits are still desperate to find mortgages which offer a competitive rate.

There have recently been a clutch of incentivised offers that have suddenly flooded on to the market, a number of which appear quite attractive.

But mortgage offers which address the central issue of small deposits and cheap rates are still exceedingly thin on the ground. The scarcity of such offers is one of the principal brakes on the well-being of the property sector.

As well as the limited choice of such offers banks are also insisting that borrowers have an impeccable credit record and are in ‘safe’ jobs. Such criteria can be difficult to reach. First-time buyers – generally young people – often do not have any sort of credit record on which their loan-suitability can be assessed. Only the most optimistic or ingenuous in any sector could describe their job as ‘safe’ in the UK’s depressed and highly volatile market in which something like 3,000 people a week are being thrown out of work.

First-time buyer mortgages shrank in January to 8,900, the lowest number since records began. Buyers had to save – on average – almost £31,000 in deposit compared to £12,000 before the Great Crash.

HSBC were the first off the block in trying to attract first-time buyers. They recently cut the price of a mortgage to 4.99 per cent for buyers with a ten per cent deposit. Now other lenders have begun to follow suit with a range of different incentives.

Abbey – owned by the Spanish conglomerate Santander – has reduced its five-year fixed rate deal for those with a ten per cent deposit to 6.89 per cent and cut its fee from £2500 to £1000. The Halifax will pay stamp duty for anyone buying for the first time. They recently announced a similar deal to pay a percentage of council tax.

The Co-op Bank – soon to join forces with the Britannia Building Society – has said it will allow first-timers to use the income of a relative or family friend to guarantee repayments.

One estate agent who wished to remain anonymous said: “ It’s all very well offering sweeties but an awful lot of first-timers still need rich parents to stump up deposits and to help with repayments if they are going to be able to buy a home.”

There has been a big increase in the interest buyers are showing in wanting to purchase property. But the demand is being stifled by the nervousness of banks and lenders.