Research from Mortgage Advice Bureau shows that 40% of UK adults are planning to buy their first home, move house or remortgage before the end of 2016 – when the Help to Buy scheme is due to finish.
12% are actively seeking a new mortgage deal within the next twelve months – with many attracted by increasing options for buyers with low deposits.
Among those seeking a mortgage within the next year, half are looking to buy a first home (50%) while 35% plan to move house. The remaining 15% want to remortgage an existing home.
26% of active mortgage seekers can only afford a 5% deposit, while only 20% can put down a deposit of more than 20%, with the majority (61%) looking for deals with a maximum deposit of 10%.
The typical income of mortgage seekers is £32,313 – marginally lower than the average income of first time buyers since 2009 (£33,485 – CML).
MAB says this suggests the return of 95% lending is beginning to release pent-up demand and also attracting borrowers with the means to manage their mortgage payments once they overcome the initial deposit hurdle.
Fewer than one in three people seeking a mortgage in the next year can afford to buy or move without outside help (32%) – underlining the value of government support for aspiring homebuyers.
Help to Buy has eased the burden on the ‘Bank of Mum and Dad’ and offered new hope to those whose relatives cannot boost their deposits. Among active mortgage seekers, 28% can only afford to buy or move with government help while 26% are relying on financial help from family.
Across all existing homeowners, 15% struggled to save a big enough deposit to get a mortgage for their current home. Despite better market conditions for first time buyers in the past, almost one in ten homeowners (9%) still wish Help to Buy had existed when they bought their first home.
Nearly one in five homeowners over the age of 40 relied on a mortgage of 95% or more to buy their first home (17% vs. 14% – all). Among younger homeowners aged below 40, almost one in three relied on financial help from friends and family to buy their first home (29% vs. 17% – all).
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “People are fast realising the wind is blowing in their favour when it comes to joining or moving up the property ladder. Help to Buy has supported efforts to make mortgages more accessible to first time buyers and existing homeowners, with more lenders and products set to drive up competition in the new year.
“Buyers are voting with their feet and we are seeing great enthusiasm for low deposit mortgages. The type of 95% mortgages encouraged by Help to Buy are familiar products and part of what’s needed in a healthy market to cater for the full range of buyer needs.
“Helping remove the need for hefty deposits is where government support has really come into its own. Some lenders have joined the official scheme while others are offering 95% mortgages on their own. Either way, the end result for homebuyers is better access to mortgages they can realistically afford.
“Lenders are being careful to lend responsibly, with affordability checks in place to protect borrowers against future rate rises. Government help means the Bank of Mum and Dad can take a well-earned break with affordable mortgages in better supply.”
