Published On: Thu, Oct 15th, 2020

Mortgage chances reduce for first time buyers according to Bank of England data – why? | Personal Finance | Finance


Mortgage availability has dried up for a whole range of buyers in recent months due to the economic impact of coronavirus. Despite this, new data from the Bank of England’s latest Credit Conditions Survey showed there may be cause for limited optimism.

The survey, which catalogues trends and developments in credit conditions, was put to lenders from September 1 to September 18 and the results are focused on Quarter three of 2020.

Lenders were asked to report changes in the three months to end-August 2020 (Q3), relative to the period between March and May, and expected changes in the three months to end-November (Q4), relative to the period between June and August.

The lenders surveyed reported the availability of secured credit to households increased slightly in the three months to end-August 2020.

Additionally, lenders expect the availability of secured credit to remain unchanged up until Q4.

READ MORE: Mortgage availability to become scarce for these types of buyers

“In some cases lenders are already raising rates to stave off demand.

“It’s understandable that demand for secured loans for house purchase increased in the third quarter as the economy was on ice for much of the second.”

Andrew went on to examine the exact type of buyers who are struggling, and will likely continue to struggle going forward: “We’re now starting to see demand for mortgages drop off at higher loan-to-values, as first time buyers with small deposits are increasingly aware that the chance of getting a mortgage agreed are somewhere between slim and zero.

“It’s a travesty that so many first time buyers will now miss out on the stamp duty holiday introduced over the summer.

“We all know the economic pain that’s in the post so it’s no real surprise that the banks are pulling down the shutters for those with smaller deposits.

“What we need to avoid, however, is banks catastrophising and pulling products for more robust borrowers at lower loan to values.

“There’s no sign of this happening yet but the storm clouds are gathering over the economy and the prospect of a ‘short-circuit’ lockdown could see lenders circle the wagons.”

Recently, the Prime Minister announced plans for introducing government backed five percent deposit mortgages for first time buyers, in an effort to turn “generation rent into generation buy”.

The plans were both welcomed and condemned by many, with some experts criticising the government for adding more debt to government’s balance sheet.

Despite the potential burden on taxpayers, the plans may prove to be crucial if implemented as the latest research from MoneyFacts highlighted the number of mortgages available in the UK fell to 2,412 in September.

For perspective, this was the lowest product count on their records since May 2010.

Also, the direness of the situation can be made evident when comparing this number to October 2019, when 4,955 mortgage products were available, which is more than double the current availability.



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