Mortgage approvals hit a 13-year high in the last months of 2020, while the return of low deposit mortgages means that first-time buyers will have a better chance of stepping onto the property ladder.
Despite economic turmoil, the house market has been buoyant as buyers look to take advantage of the Stamp Duty holiday, set to continue at the rate of 0 per cent on the first £500,000 until 30 June 2021, then 0 per cent on the first £250,000 until 30 September 2021.
Those with only modest savings to put towards a home have also been able to join in the action, with a rapid increase in the range of offers available for those with low deposits.
Increase in mortgage approvals
In November 2020, over 100,000 mortgages were agreed, the highest number since August 2007 and some 30 per cent higher than the February 2020 figure, recorded before the effects of the pandemic took hold.
This reflects a boost in the property market caused by the temporary reduction in Stamp Duty. Another reason for the increase in activity could be buyers’ desire to change their home to something more suited to new home working arrangements.
This could include home office space and more outdoor space as well as a property further away from places of work as people hope to hold on to home working for at least some of the week.
Increase in low deposit mortgages
For much of 2020, low deposit mortgages had all but disappeared from the market, as lenders reacted to the pandemic. There was concern that younger borrowers might struggle to make repayments during a time of financial turmoil and that they were at a higher risk of redundancy.
Another problem was simply the logistics of processing mortgage applications as lenders struggled to cope with staff absences and employees working at home.
In September 2020, standard deals for those with a 5 per cent deposit were non-existent, with only a handful available for those with 10 per cent to put down.
At the same time, house prices were rising, leaving many first-time buyers unable to afford anything.
However, by January 2021, there were nearly 200 mortgage lenders willing to lend to those with a 10 per cent deposit, according to financial information company Moneyfacts.
Government-backed mortgage guarantee scheme
To add to the choice, the government announced in the March budget that it would guarantee 95 per cent mortgages for buyers of properties up to £600,000. This will be available for everyone, not just first-time buyers or those purchasing a newbuild property. The mortgages will be subject to affordability checks. The chancellor stated that several of the country’s largest lenders, including Lloyds, Natwest, Santander, Barclays and HSBC will be offering the loans from April 2021.
The scheme will run from April 2021 until 31 December 2022. Borrowers will have the chance to fix the initial repayment rate for at least five years.
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