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Lenders pulling 5 and 10% deposits for FTBs

Journalist: Grace Gausden, i newspaper

ended 21. December 2022

Which lenders have pulled their 5 and 10% deposits for first time buyers? Why have they done so? What are the concerns going forwards? Will some put theirs back on the market now the Government is extending the mortgage scheme? 

8 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
With the housing market about to implode and a government offering no meaningful stimulus, it’s no surprise lenders are being risk-pragmatic. In a deteriorating economy where borrowers could unwittingly find themselves out of a job, a lender won’t want a depreciating asset sat on their books with a liability that’s getting bigger. I’m only surprised more lenders haven’t gone further and faster.
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Imran Hussain
Director at Harmony Financial Services
Lenders pulling 5% and 10% deposit products is a short-term measure to control volumes more so than a complete aversion to risk. Lenders are still assessing the market after the chaos of the last quarter of 2023 triggered by the mini-Budget. Lenders will continually assess the risk on their books and move accordingly.
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Craig Fish
Director at Lodestone Mortgages
There are still plenty of options available for first-time buyers and those with small deposits of between 5 & 10%. Any withdrawals we are seeing are likely to be only a short-term measure whilst lenders assess their product offering and plans for 2023. Lenders are in a strong financial position and are willing to lend as long as the individual passes affordability tests. The government has also extended the mortgage guarantee scheme so clearly, there is a lot of support out there. Negative equity could be a problem, but only for those that need to sell, which is likely to not be many people. Many clients ask 'should we buy or wait', the answer is simple, go ahead make an offer and buy once you've done your research and checked affordability. Over the long term prices will recover again, so why delay?
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Mike Staton
Director at Staton Mortgages
Whilst there is a sense of fear surrounding 95% mortgages, we are seeing a replay of what happened at the beginning of the pandemic. There is uncertainty around house prices at the moment and even the most adventurous lender will be thinking twice about lending on a property that may have no repossession value in 6 months time. Let’s face it, lenders couldn’t give 2 hoots about whether it is worth it now or it is affordable to you, they care about themselves having an asset that is of value to them if they need to take it back. If you are flipping a property then house prices will be giving you a headache, but If you are buying a residential mortgage and planning on living there for 5 or 10 years at least, then you shouldn’t even be thinking about negative equity
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Amit Patel
Adviser at Trinity Finance
Where lenders have pulled their high loan to value products, it must be stressed that this is only a short-term measure and lenders still have the appetite to lend. As we saw during Covid, lenders exited the market only to return with new products a short while later.
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Gary Boakes
Director at Verve Financial
This has been happening for a while, the lenders have been pulling 2 year fixed rates at the higher ltv due to the risk of the house prices lowering 10%+ next year. With the mortgage guarantee scheme being extended hopefully this will improve the confidence at higher ltv and with talks of the base rate forecast now being lower than previously expected maybe the price drop will not be as catastrophic as expected. This market is forever changing and all we do know is the next 12 months are going to interesting and challenging.
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Hannah Bashford
Director at Model Financial Solutions
Although annoying right now this seems to be a temporary measure whilst lenders take stock and look to manage their risk. Lenders manage their criteria and products to attract certain clients and if they have a large amount of clients at high LTVs it would be prudent to assess that at this time when house prices are expected to drop 5-10%.

The risk to the lender and clients with low deposits is they end up in negative equity; where your property is worth less than your mortgage.

The extension to the mortgage guarantee scheme will give lenders some comfort over the next year to continue to lend at these higher LTVs.
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Austyn Johnson
Founder at Mortgages For Actors
There will be a lot of pulling and publishing in the next month. Lenders will be re-assessing how they view the 95% and high LTV mortgages. Just today, NatWest has launched 2 new 95% products when others are pulling them. Where there is a market, there will be a person selling their wares. Keep calm and carry on!