Aaron Strutt of Trinity Financial answers some topical questions.
How much deposit do I need as a first-time buyer now?
First-time buyers need a deposit of at least five per cent to qualify for a mortgage. Banks and building societies pulled a huge amount of their low deposit rates during Liz Truss's tenure but thankfully, they are back and available again. Borrowers will need a 40 per cent deposit to access the most competitively priced rates. However, the gap between the highest and lowest deposit mortgages is often only around one per cent.
How are lenders helping with affordability?
There are a range of options available to make mortgages more affordable, including longer mortgage terms of up to 40 years, multiple applicant mortgages, parental support mortgages and part interest-only. Some lenders offer more generous income multiples than others especially for first-time buyers, professionals and higher earners. Halifax for Intermediaries recently announced it would provide larger mortgage loans for some borrowers when they take a five-year fix. The move could mean the maximum lending amount increases by up to 9% or around £25,000 on an average application. Nationwide for Intermediaries offers up to 5.5 times salary mortgages to employed applicants earning £37,000 individually or £55,000 jointly. The scheme has been incredibly popular and helped significant numbers of first-time buyers onto the property ladder.
Would you advise to go with a fixed rate or a tracker at the moment?
The vast majority of borrowers take fixed-rates although trackers have increased in popularity. Tracker rates are not as competitively priced as they were because the Bank of England base rate has increased so much. More of our clients are taking two-year fixes, or tracker mortgages without early repayment charges, because they want to see if rates come down. Fixed rates are much cheaper than they were after the mini-budget was announced. Many two-year fixes are priced around 4.5% and the lowest three-year fixes start from 4.34%. Santander has a 3.99% five-year fixed rate for borrowers with a 40% deposit, it has a £999 arrangement fee and the maximum loan size is £1.5 million.
What's the outlook for mortgages in the next 12 months?
Inflation is predicted to fall quite rapidly, and if it does, the cost of borrowing should decrease. We are hoping the lenders will be able to offer more competitively priced rates next year to bring more confidence back to the market.
I'm buying a leasehold apartment - how does that affect my mortgage?
Mortgage lenders often restrict the amount applicants can borrow on leasehold apartments, so you may need a larger deposit. Some lenders require the property to have a minimum term remaining on the lease. Lenders also take issue with properties that have high service charges and ground rent.
My lender has valued my purchase at less than the agreed price. What should I do?
It is not unusual for valuers to down-value properties by a few thousand pounds or substantially more. If you have the luxury of being able to choose between lenders and your purchase is down valued, you could switch the bank or building society you apply to and hope their valuer is happy. If the new bank or building society uses the same firm of valuers they may be less likely to raise their estimate. You could also negotiate with the vendor to get a discount on the asking price. If they will not budge on the prices, you may need to put in a larger deposit. We recently had an application for a client where the property was down valued by £10,000, so we submitted their application to another lender, whose valuer agreed that the property was worth the asking price after all.