Tips For Getting A Mortgage First-Time Buyer

What are the current mortgage rates for First Time Buyers in the UK?

They change weekly, or even daily. We’ve had a funny year – we’re currently at the end of May 2024 and we had a lot of rate cuts in January and early February which was very encouraging. The last three or four months have been quite stable, then rates increased a little bit and then a couple of weeks ago they came down.

But broadly speaking they’re actually quite attractive. The majority of First Time Buyers I speak to are pleasantly surprised when we start talking about how much the mortgage will cost per month. There’s very few that can’t afford it.

It’s probably a double-edged sword, because rents are so expensive at the moment. But the interest rates are actually pretty good, certainly in comparison to where we were at the back end of 2023.

But it could all change tomorrow. It could change next week. We’ll take a snapshot once you are actually looking for a property.

Is it difficult for First Time Buyers to get a mortgage?

I hear that a lot of First Time Buyers are struggling – and in a lot of cases it’s down to preparation. You need to get your ducks in a row.

To give you an example, a lender is going to look at your driving licence, passport, bank statements and pay slips, plus you will need proof of deposit.

Very often, a client has gone to university and been in halls of residences or shared accommodation. Bank statements are all going to mum and dad’s address. They aren’t living there but they don’t want secure mail or driving licences and passports going to shared accommodation as things go missing.

But as a First Time Buyer your addresses need to be correct, your bank statements and pay slips need to be going to the right address. I’ve had one client recently where his pay slips were at mum and dad’s address but he’s had three jobs and three addresses since he last lived there.

From a lender’s perspective, that is very much a red flag. Your employer is meant to know where you live, and your driving licence is meant to be registered at your current address.
Your bank statements are proof of your address.

So it isn’t any more difficult for a First Time Buyer than a second time buyer, as long as you have everything in order. Normally at our first appointment I will make sure everything’s at the right address because it’s something that can slow you down. I think DVLA currently says it will take up to two weeks to change the address on your licence. It can be dealt with before you find a house – and that will make it an awful lot easier.

Is it better to buy a flat or a house as a First Time Buyer?

There’s no right or wrong. If you’re buying a flat, you have no garden in the majority of cases, which makes the maintenance much easier. But the value of a flat is very much based on the quality of the lease. So if there was only 50 years left on the lease, a lender would take a grave view on that and probably would not lend.

You would also tend to pay a ground rent and a service charge on a flat, which are things you wouldn’t have with a freehold property. This gets taken into account in affordability calculations.

It’s not necessarily any better or any worse to buy a flat or house, there are just different things to take into account. Equally, when you’re buying a freehold property like a house there can be other issues – an old terraced house might need work on it and you’ll need to assess the quality of the roof, for example. Both have their benefits and drawbacks.

How long until you are classed as a First Time Buyer?

If you haven’t had a residential mortgage for a certain number of years, some lenders will treat you as a First Time Buyer. But ultimately, there’s not an awful lot of difference between a First Time Buyers mortgage and one for somebody that has bought before.

What is the average deposit for a First Time Buyer in the UK?

Essentially, what you’ve got is what’s important. If you’re a First Time Buyer and you have £10,000 saved up, that’s your deposit. So whether that works out as a 5% or a 10% deposit, it doesn’t matter – it’s what you’ve got.

You would need a minimum of 5% for a mortgage – although there is currently a lender out there offering a 1% deposit [podcast recorded in May 2024]. It’s just one lender and it is very much criteria led.

For the majority of high street lenders you need a minimum of 5% deposit. Putting a 5% deposit down will give you the most expensive interest rates from a lender, because of the risk. If you put a 10% deposit down, it’s a lot cheaper because the risk to the lender goes down. A 15%, 20% or 25% deposit will put you in a different Loan to Value bracket, each time with cheaper interest rates.

How do banks know if you are a First Time Buyer?

When they do a credit check, your file shows whether you’ve had a mortgage, whether you’ve got a home, credit cards, hire purchase etc. All the lenders use credit scoring to assess an application.

Do house sellers prefer First Time Buyers?

If there are a number of offers on a property, it’s a little bit like Top Trumps where a cash buyer would tend to trump everybody, because there’s no need for a mortgage, valuation or surveys, plus they’ve got the cash in the bank.

If there’s no cash buyer, a seller will absolutely want a First Time Buyer because of the lack of chain. You don’t need to sell a property, so you can move fairly quickly which can speed up the whole chain.

A First Time Buyer is very important in the housing market and you shouldn’t underestimate your ability to negotiate quite hard with a seller because of those circumstances.

How can a mortgage advisor help a First Time Buyer?

We’re here to chat everything through with you – you’ll soon find out whether you get on with us. In that case I explained right at the outset, the First Time Buyer couldn’t get a mortgage initially, and we’ve now got a relationship that’s gone on for 18 months.

The service that I offer a client is very much a hand-holding exercise from start to finish. It isn’t just about getting you a mortgage. It’s talking you through how to go about it, to viewing properties, finding a property, making an offer, arranging a mortgage, getting a survey, going through that survey together and then working through all the legal side before you get the keys to the house.

A good mortgage broker will take you through everything. It’s a journey and we will go through that journey with you. It’s not a case of arranging the cheapest mortgage – there’s a lot more to our services.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Some products are only available when purchasing directly from the Lender and not a Broker