At the start of the year, first-time buyers, moving companies, or those looking to reschedule their home with a small down payment or equity, had hundreds of mortgage deals available.
Unfortunately, there are very few options left; B. Now only 14 standard first-time buyer offers with a 10% down payment (the amount of a down payment is essentially a percentage of the property price that you have to pay upfront with the rest of the money borrowed from the mortgage lender) and many of them are long term solid deals that you would be bound for up to 11 years.
With so few options in the market, short-lived deals that last a day or two have become a common tactic for certain lenders including Accord, TSB, and Coventry Building Society to keep offering low deposit mortgages without the risk that they are flooded applications.
How does the deal work?
Accord Mortgages, the pure realtor arm of the Yorkshire Building Society, has signed a new mortgage agreement that requires a relatively small 10% down payment. It’s also unusually open to both first-time buyers and moving companies.
The latest deal has a fee of £ 995 with a five-year fixed rate of 3.79% for mortgages up to £ 500,000 and an increase to 3.89% for mortgages between £ 500,001 and £ 600,000.
However, it is not available to anyone looking to reschedule and get a new mortgage on your current property.
How long is it available?
It is due to be taken off the market at 8 p.m. on Wednesday and closed to applications, less than three full days after its introduction. If you have not submitted the application by then, it will no longer be available (you do not need to approve the application by then as this will take some time).
This means you must have found the property you are buying and accepted an offer before you can even think about it. Unfortunately, if you are just starting out looking for a property, you do not have time to apply.
What are the pros and cons of this short-lived business?
Buying a home is probably the biggest purchase you will make. The notion of rushing to sell a mortgage might therefore seem reckless. What is crucial, however, is that this mortgage deal is only available through a mortgage broker who should only recommend it if it is best for you. That said, there are some clear pros and cons of this deal:
benefits::
- It’s currently one of the cheapest 10% deposit offers for first time buyers and moving companies. The Accord rates (3.79% and 3.89%) are some of the most competitive low deposit mortgages available today, although interest rates are slightly cheaper.
Nationwide offers a two year fix of 3.49% or a five year fix of 3.54%, both with upfront fees of £ 519 (after cashback), although these apply to first-time buyers only. For moving companies, Accord’s current deal can only be topped by a Darlington Building Society three year fix of 3.59% with a fee of £ 1,119.
disadvantage::
- While this is a cheaper 10% deal, 10% deals are still inherently expensive. Due to the lack of options available, the prices of the products in the market have increased so with a 10% deposit you can expect to pay around 3.5 to 4%. This compares to rates around 2.5-3% if you are able to sit tight and save for a 15% deposit.
Imagine you have a deposit of £ 30,000 on a house of £ 300,000 – that’s a 10% deposit. At a typical 3.5% you would pay £ 1,352 / month. However, if you could save on a deposit of £ 45,000 (15%), at a typical rate of 2.5% you would pay £ 1,144 and save £ 4,992 over the two years.
- You have to be quick if you want to grab one. Time is a key factor and you need to be ready with a broker to line up during the small window for applications. Since this is such a big financial decision, don’t let time pressures sway you.
How To Find A Cheap Mortgage Deal For You
The Accord deal is only available if you apply with the help of a mortgage broker. This is probably the best way to find a new mortgage. Brokers know important details about the lender’s criteria and are qualified to advise you on the right mortgage deal for you, which is especially important right now as these have been tightened across the board.
They will advise you on all of the deals in the market available to brokers including flash sales from Accord and all specialty mortgages available.
This may include guarantor mortgages that take into account the income of your parents (or another relative) as well as that of your guarantor, provided that the guarantor can still cover his own mortgage. This can help you get a bigger mortgage as it translates into higher income. Offers are few, so it is best to speak to a broker to see if any of these are available to you.
Brokers either charge a fee or receive a commission from the lender once you take out a mortgage. You should clearly explain their fee structure before starting the mortgage process with them. For full details on how to find a broker, see our Cheap Guide to Finding Mortgages,
Alternatives available if you only have a small deposit / equity
If you have just a small down payment or little equity in your home, the following other options are available to you:
- If you can get a 15% deposit (even if that means relying on help) it may be worth doing. If you want to increase the number of mortgage deals available and get a cheaper interest rate, it is worth paying a 15% down payment if possible. This is because many lenders are still offering deals with an LTV of 85%, which means the interest rates are more competitive. Here’s an example of how a little more scraping together can make a big difference for a first-time buyer:
Imagine you have a deposit of £ 35,000 on a house of £ 250,000 – that’s a 14% deposit and the top fix for two years is 3.49%. However, if you could find an extra £ 2,500 to hit 15%, the top fix for two years is 2.12%, saving £ 2,605 / year. - If you can only afford a small down payment, take a look at specialized mortgages that may offer alternative options. If it is not possible to get up to 15%, there are still a few alternative options available, including:
– – Help with buying equity loans. This is an increasingly popular means of getting onto the residential ladder, but only for new builds of £ 400,000 or less (£ 600,000 in London). Here the government will lend you up to 20% (40% in London) interest-free for five years. You can find more information in our Help with buying equity loans to lead.
– Shared property. This way, first-time buyers can buy a portion of the property and rent the rest. Read page nine of ours First time buyers guide how to apply and how it works.
- If you don’t necessarily have to buy now, wait. Don’t stretch yourself to the limit just to get a mortgage – the overall health of your finances is more important. Remember that renting is not a dirty word. While you may now be able to get a cheaper deposit deal, you may have to pay for the privilege as it is likely to be expensive.
- Finally, don’t assume that you will have to pay the asking price for a property – always see if you can haggle. Before you even apply for a mortgage, see if you can bring down the price of the property you are looking to buy. The less you pay, the more the amount you have reserved for your deposit is worth.
For example, if you have a deposit of £ 20,000 and you pay the asking price of £ 143,000, that is a deposit of 14%. However, if you put in an offer (which will be accepted) of £ 133,000 your deposit will be equal to 15%.
Why Are Lenders Offering “Flash Sales” On Mortgages?
In essence, a quick “flash sale” allows lenders to offer low deposit mortgages while keeping demand down to levels they can maintain rather than choosing not to lend at all.
David Hollingworth, assistant director of communications at L&C Mortgages, told us, “With so few options on offer, lenders who offer 10% down payment products run the risk of being inundated with applications. As a result, the lenders who have taken a step are trying to limit the volume through admission restrictions and deadlines. “
Jeremy Duncombe, Director of Intermediary Distribution at Accord Mortgages added, “By extending availability to three days, we can provide valuable support to the market while maintaining the level of service. After that momentum, we will evaluate the impact of the products and the competitive conditions before returning again if we can. “
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