BANKS are launching mortgage flash sales for home buyers with small deposits as the deals become as “rare as Glastonbury tickets”.
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As of 8am today, TSB is offering a limited number of home loans for those with a 10% or 15% deposit, who apply via a mortgage broker.
The sale, which was first reported by The Times, will end as soon as TSB’s allocated funds run out or the clock hits 5.30pm today.
The deals are only available on loans of up to £350,000 for houses and bungalows, and not for those buying a flat.
With a maximum term of 30 years, the loan is available as a five-year fixed mortgage fee-free with an interest rate of 3.49%, or with a 3.24% rate and a £995 fee.
First-time buyers also need to be wary of early repayment penalties of up to 5%.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
‘As popular as Glastonbury tickets’
Aaron Strutt, of mortgage broker Trinity Financial, said he’s never seen mortgage flash sales over just one day before.
He added: “TSB is telling first-time buyers to take it or leave it, since if they don’t get this deal, they face losing the house they want.
“I’m not sure if these mortgages will be as popular as Glastonbury tickets but we’re in uncharted territory, so we’re getting there.”
Tickets for the annual music festival are always incredibly popular, with the tickets 2020 selling out in under 36 minutes.
Glastonbury had around 135,000 tickets up for grabs for this year, while it’s not clear how many mortgages are available in the TSB flash sale.
How to boost your chance of getting a mortgage
HERE’S how you can boost your chances of being accepted for a mortgage:
Check your credit score before you apply – Lenders will look at your credit score before they decide whether to offer you a loan. If your application is rejected then it will appear on your credit report, which could affect any future borrowing. Check your score by contacting one of the three main credit referencing agencies – Experian, Equifax or TransUnion.
Shop around for a mortgage – You should never assume that yout bank or building society will give you the best mortgage deal. Make sure you shop around to get the best rates.
Draw up a budget planner – It’s important that you approach a lender with a fully thought out plan of how you will make the repayments.
Reduce your credit card debts – You can still be accepted for a mortgage with credit card debt, but you should try to reduce those monthly payments if you can.
Resist going on a spending spree – As part of deciding whether or not to accept your mortgage application, a lender or bank will have to know that you can afford to make the monthly repayments. They do this by reviewing your recent bank statements and a spending spree may make it look like your outgoings are too costly.
Mr Strutt told The Sun some lenders have previously offered set rates for a week or a few days, but never just a day.
He added: “Clearly TSB does not want to be overrun with applications and some borrowers will be able to get on the property ladder with this product, but it does not give applicants time to prepare.
“Taking a mortgage is a big financial decision and it’s not something that should be rushed because buyers are in a now or never situation.”
TSB is only the latest bank to offer first come, first served mortgages.
Accord Mortgages, part of Yorkshire Building Society, this week reportedly released mortgage deals for those with 10% deposits for 48 hours only.
Meanwhile, HSBC previously offered 10% deposit mortgages from early morning until it hit a lending threshold and then withdrew them for the day.
Last week, it stopped offering 10% mortgage deals altogether following high demand.
What are other lenders offering?
Other lenders are still offering mortgages for people with a 10% deposit, although these often come with tighter restrictions.
Virgin Money, for example, has a 10% deposit deal that requires borrowers to fix the rate for seven years.
The average mortgage rate for a 10% deposit deal is currently 3.69%, up from 2.92% on January 1, based on a five-year, fixed-rate mortgage, according to Moneyfacts.
In comparison, the average five-year, fixed rate mortgage for borrowers with a 40% deposit is a lower 2.03%, down from 2.07% on January 1.
There are currently just 12 mortgage deals with a 5% deposit, 46 with a 10% deposit and 357 deals with a 15% deposit.
This compares to 386 5% deals in January, 751 10% deals and 658 15% deals, Moneyfacts said.
Jonathan Harris, managing director of mortgage broker Forensic Property Finance, told The Sun: “This state-of-affairs is unheard of and demonstrates the pressure lenders are under.
“We have become used to them offering high LTV [loan-to-value] deals for two or three days since lockdown eased but a one day sale takes it to another level.
“With such deals being pulled so quickly, it really adds to the pressure for first-time buyers trying to get a mortgage. They must be organised and prepared to move quickly.
“A broker would be a good place to start as they will know which lenders are offering such fire sales and will understand what it takes to secure funds.”
Ian Ramsden, director of borrowing at TSB, told The Times: “We want to support the demand from our customers as much as possible, particularly first-time buyers.
“This temporary reintroduction will allow us to manage our service levels as well as give customers a chance to get their first home.”
Barclays and NatWest last week cut the amount home buyers can borrow by up to 18%, leading to fears more lenders will follow suit.
Meanwhile, Nationwide is refusing to lend to first-time buyers whose entire deposit has been gifted to them, by the bank of mum and dad for example.
Furloughed workers are struggling to get a mortgage too, as lenders wait until the scheme ends and redundancies begin to take affect before offering loans.