What re-introducing 95 per cent mortgages means for first-time buyers in Gloucestershire

The Prime Minister chose Gloucestershire as the spot from which to drum up some publicity for the Government's decision to re-introduce 95 per cent mortgages back into the market, but before you rush in here is a little food for thought.

By Andrew Merrell  |  Published
The founder of Fairview Financial, Luke Tomkotowicz, reveals what the reintroduction of 95 per cent mortgages back into the market really means.
The founder of Fairview Financial, Luke Tomkotowicz, reveals what the reintroduction of 95 per cent mortgages back into the market really means.

Earlier this month Boris Johnson could be found in Stroud, on a building site no less, laying bricks as the Government banged the drum for its new 95 per cent mortgages.

On the face of it, it sounds like smaller deposits will be needed and less time saving for those keen to get onto the property ladder.

But to get to grips with just what is going on and what it might all mean for borrowers in Gloucestershire encouraged by the news, we turn to the founder of mortgage experts Fairview Financial, Luke Tomkotowicz.

About the expert – Luke Tomkotowicz, managing director at Fairview Financial

Luke Tomkotowicz

Luke founded Fairview Financial in 2017 with the intention of creating a customer-driven company delivering honest, ethical and transparent advice.

Over the course of three years, Fairview Financial has grown quickly and has now expanded into several fields of expertise by bringing in a wealth of experienced advisers.

The firm can now advise all manner of customers, including first-time buyers and first-time landlords, on equity release, bridging loans, development finance and commercial mortgages. Fairview Financial has built a reputation for leaving no stone unturned to find the right product.

In his spare time Luke is an avid golfer, spends time with his family and likes to travel the world. He also loves taking Treacle, his loving terrier adopted from Cheltenham Animal Shelter, on long walks.

What is the new change to mortgages just introduced?

The Government scheme has added new impetus to the market with a mortgage subsidy which has helped increase lender’s ability to increase their lending from 90 per cent to 95 per cent. This has opened doors, predominantly for the many first-time buyers who have a limited deposit. It is fair to say that at Fairview Financial this has had an extremely positive impact on the market.

Didn’t high street lenders do something like this in the past? Why did they stop?

Five per cent deposit mortgages were readily available pre-covid, but these soon vanished once covid hit the country hard in 2020. The major concern for the lenders were twofold. Firstly, lenders were concern about the impact of covid on house prices. Purchasing a property with a small deposit with an additional risk of falling property prices could lead to immediate ‘negative equity’ (when the property valuation is worth less than the total mortgage balance).

Secondly, it was an issue of resource for the lenders. With the onset of furloughing and working from home, many lenders could not adapt quickly enough and withdrew from many areas of the mortgage market, including the low-deposit mortgage market.

Why introduce this now and who is it aimed at?

As we hopefully head towards the end of furlough and some form of normality, the lenders have all started to reappear as the risk – currently – seems to have been mitigated. Lenders have returned in swathes, happy to help those with a 10 per cent deposit and some (with or without the Government support) have introduced 95 per cent mortgages again. The majority of the 95 per cent mortgages are solely aimed at first-time buyers who are vital cogs in the mortgage market.

Is it only for first-time buyers, or is this something likely to be available for everyone – even those considering buy-to-let or a second home?

First-time buyers are clearly being targeted with the return of the 95 per cent mortgages, but these products can also apply to home-movers (eg, non first-time buyers). Those looking to purchase buy-to-lets and investment properties can also benefit from advantageous deposit sizes although these may differ. The overall picture is that of lenders returning back to the market with a greater appetite to lend than anytime over the last 12 months.

Of course, news of mortgages being offered for a five per cent deposit makes for a good headline. How important is it buyers don’t just rush in, but take some advice before they rush in?

It is so important to speak to a mortgage broker if you are a first-time buyer. There is a lot of information online and much of this can leave you confused about your options. At Fairview Financial, we will find you the right product which is affordable and will reflect your circumstances. The lenders may be willing to lend 95 per cent mortgages, but we also need to ensure that the customer fits the lender too. Such a huge decision must be approached correctly.

The housing market, of course, is a key economic driver for us here in the UK. Do you predict a significant uptake from customers for these new deals, and what impact might the change have on the housing market?

If you view the mortgage market as a production line, then we need the next phase of first-time buyers purchasing properties to commence their own personal property journeys. They will see equity grow in their properties and mortgage balances decrease year on year. This scenario sets the first-time buyer up for their next purchase and when they sell their home, the sequence commences again. This organic market needs to remain fluid and first-time buyers maintain this natural order.

Have you seen any interest yet from customers contacting Fairview Financial?

Since April 2021, Fairview Financial has seen a dramatic increase in first-time buyer enquiries. The increase in 95 per cent and 90 per cent mortgages alongside so many first-time buyers returning to work after months of furlough has generated an influx of pent-up purchasers ready to buy their first homes. It is a genuinely exciting time and it is also worth noting that lenders appear much more willing to lend and are less likely to be seen as being reluctant to help.

Are we likely to see an increasing number of deals come onto the market in the next few weeks and months if this all proves attractive – and should customer wait or act now?

It is likely that we will see more lenders tentatively reintroduce themselves back into the market, but many of the main lenders are here already (eg Halifax, Leeds, TSB, HSBC, Santander).

At Fairview Financial, we believe we may not see any improved rates yet, but rather more diversity. Those who are self-employed or have credit issues are still not entirely catered for and over the next few months, we believe that these customers will see more options appear. The other main lenders will also return and this in turn will see competition help reduce rates too. This all paints a very optimistic picture for the future.

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