Mortgages for First Time Buyers - Urban Union Ltd

The property market last year

According to the latest figures from Halifax, the number of first-time buyers went up by 35% between 2020 and 2021. The average age of a first time buyer last year was 32, with a £53,935 deposit and purchasing a home costing £264,140. There was a rise in the number of first-time buyers in every region of the UK last year with the smallest increase seen here in Scotland at 24%. The average first-time buyer deposit fell 6%.

House price growth has outstripped the rise in income with the average price to earnings ratio standing at 6.9.

The rise in the number of first-time buyers is due to the reassessment of our priorities during lockdown and a greater availability of homes suitable for first time buyers as the stamp duty holiday meant many people took the opportunity to move up the property ladder.

Interest rates

Interest rates remained historically low in 2021, so there was only one way for rates them to go in 2022 and that was up.  The recent base rate move only added a small amount to monthly payments for those who already have a mortgage, and was much lower than previously predicted. It could be the first of several rate rises in 2022 as the economy recovers from the pandemic. This means that variable rate and fixed interest rates offered by lenders will go up but often this is offset by lower arrangement fees making lending still cheap in historical terms.

First-time buyers have seen opportunities improve over the last year. At the start of 2021, lenders were only tentatively offering 10% mortgages and in January 2021, only 160 deals were available for these buyers compared 779 pre-pandemic. Those with a 5% deposit were unable to find deals available.

The good news is that mortgage availability and rates have improved. According to Moneyfacts data (December 2021) the typical rate on a two-year fix for someone with a 10 per cent deposit is now 2.51%, which is much than the 3.79% rate at the same time in 2020, and lower even than pre-pandemic.

Affordability rules

As we have highlighted in our previous blog, affordability rules are changing and this could have a huge impact on purchasing your first home. Read more.

Mortgage options

Green mortgages

Several lenders have launched mortgages that are favourable if you are purchasing a home that is more energy efficient, usually requiring a Energy Performance Certificate (EPC) rating of A, B or C making it an option for those purchasing a newly built property. These mortgage options look set to increase this year with a growing number of green products coming to the market.

Net Zero is a focus for the government following the successful COP26 event in Scotland last year, and lenders are keen to support current and potential homeowners in choosing energy efficient homes. These lenders are often offering a high loan-to-income ratio or cashback rather than lower rates.

Guarantor Mortgages

A guarantor mortgage is for buyers with a poor credit rating or those who cannot raise the deposit required to obtain a mortgage. There are still several guarantor mortgages currently available in the market. If you’re interested in a guarantor mortgage you will need a close relative to be willing to be liable for the entire mortgage should you default on your repayments. Your guarantor will be required to put up collateral by way of savings or their own home as part of ‘springboard’ deals. It’s worth noting that guarantor mortgages are usually a higher rate than a standard residential mortgage. Due to the small number of deals available it’s advisable to talk to an independent mortgage advisor.

Shared equity or ownership

Shared ownership enables you to buy a share of a home instead of having to fund its entire cost. You can buy a 25%, 50% or 75% share of a home with the remaining share is owned by a housing association. Because the housing association owns a share of your home you don’t own it outright but will pay an Occupancy Charge to the housing association.

If you cannot afford the full price of a home for sale in the open market you might be able to get help through the Open Market Share Equity (OMSE) scheme. This is available across Scotland to first-time buyers and priority groups including those over 60, social renters, disabled people, members of the armed forces, veterans and widows or widowers of those who have served.

You’ll pay for the biggest share which is usually between 60% and 90% of the home’s cost. The Scottish Government will hold the remaining share under a shared equity agreement which it will enter into with you. You’ll have complete title and hold the deeds but the mortgage will have a security on the home to protect the Government’s share. If you sell the home, the Scottish Government will get a share of the money.

It is important to consult with an Independent Financial Adviser before applying to the scheme as they can help you to decide which is the most appropriate scheme for your circumstances.

Mortgage guarantee scheme

The Mortgage Guarantee Scheme can help first-time buyers to realise their dream of buying a first home – this is caused a huge spike in the number of lenders offering 95% mortgages out-with the scheme, which is great news for first time buyers.  Find out more about this scheme. 

Urban Union

If you are looking for your first home, we have a range of suitable properties for sale at Pollokshaws Living, Pennywell Living and Laurieston Living and at present, you can reserve for just £99 until the end of February. Find out more.

Pennywell Living
Pennywell Road, Edinburgh, EH4 4NL
T. 07940 992182

Pollokshaws Living
Pollokshaws, Glasgow
G43 1LY
T. 07498 057112

Our Marketing Suite is open Thursday to Monday 11am to 4pm.

Laurieston Living
Off Bedford Street, Glasgow, G5 9LQ
T. 07498 057114