First-time buyer mortgages are back

FIRST-TIME buyers have been offered a glimmer of hope as banks launch a host of new deals and cash incentives.

For months, it has been nearly impossible for homebuyers with small deposits of 5 and 10 pc to find a mortgage.

But TSB and digital bank Atom have joined Yorkshire Building Society to launch a range of loans for borrowers with a 10 pc deposit, while Virgin Money cut its rates.

Nationwide and Platform, owned by Co-op Bank, announced plans to scrap restrictions on gifted deposits.

However, rates have rocketed. The average two-year fixed rate for a 90 pc mortgage has jumped from 2.05 pc in January to 3.55 pc in October, according to Bank of England figures.

Accord, owned by Yorkshire BS, charges 3.69 pc for a two-year fix, and 3.79 pc for a five-year deal — with a £995 fee.

TSB and Platform are also offering fiveyear deals at 3.79 pc. TSB has a £995 fee and offers £500 cashback. Platform’s deal is fee-free and has a £1,000 cash incentive. Atom charges 3.81 pc on a five-year deal with no fee and £500 cashback.

Chris Sykes, of mortgage broker Private Finance, says the return to low-deposit lending shows banks believe the housing market has almost weathered the Covid storm.

But Simon Cutler, director of independent financial adviser Blackdown Financial, says it’s ‘more like a temporary change of mood to entice new borrowers for a short time’.

Meanwhile, self-employed borrowers are facing a clampdown because banks and building societies are nervous about them not having a guaranteed income.

Last week TSB restricted lending to the self-employed with at least a 25 pc deposit. Homebuyers can also only borrow 4.25 times their earnings compared with 4.49 for those who are employed.