First time buyers across the UK are frantically snapping up properties in a bid to beat the stamp duty deadline, which is now fast approaching.
As buyers are thrown into a last minute housing market frenzy, many are finding themselves torn between holding out for higher loan-value (LTV) mortgages and buying property before the end of the stamp duty holiday.
Return of the 90% mortgage
First time buyers have been thrown a lifeline to get onto the property market with a number of banks offering lower deposit mortgages.
Leading high street bank HSBC recently launched a new 90% loan to value mortgage and set aside a massive £3 billion for first time buyers this year.
What this means is that if a buyer has a £10,000 deposit and borrows £90,000 to buy a £100,000 property, the LTV is 90%. This is great news for first time buyers whoíve been desperately trying to claw their way out of the rental sector.
HSBC is not the only bank to begin this crusade of tempting mortgages for first time buyers. Yorkshire, Marsden and Hinckley & Rugby building societies have all announced mortgages with an LTV of 90% in the last two months.
Banks and lenders have been tight with their high LTV mortgages recently and for the last few years they have only dared to offer between 75% and 85% LTV mortgages, at the very highest. These mortgages require a larger deposit, putting a huge financial strain on buyers to save cash within an economic climate which seems to consume every penny they have.
With the pitfalls of pay freezes, job losses, record high rental prices and low returns on savings accounts, putting any money aside for a house has been nearly impossible for many in recent times. This has driven a number of potential homeowners to the private rental sector and, with such high demand, landlords have been able to push up prices to alarming rates in some cases.
Luckily, the beautifully simple process of paying a lower deposit or smaller equity and gaining a house is back, but for how long?
Along with 90% LTV mortgages, HSBC is also offering customers a discount rate of 3.84% with no booking fees, no standard valuation fees and no completion fee. For those with a 10% deposit who wish to fix their mortgage payments, HSBC is offering a rate of 4.49% which is fixed for two years.
Yorkshire Building Society
Another bank that is serving up 90% LTV mortgages is the Yorkshire Building Society. Theyíre offering mortgages, which only require a 10% deposit with two, three and five year fixed rates. They start from a two-year rate at 4.49%, three years at 4.59% and five years at 4.79%.
Saving is tough and Nationwide recognises that by offering buyers a 95% LTV mortgage. Whilst this is an attractive offer, there are some drawbacks. The 95% mortgage is only available to existing customers who are switching at the end of their current deal.
Despite this, Nationwide is also offering a 90% LTV for two, three and five year fixed rate deals, with 5.29% for a two year deal.
Some leading industry experts believe that a two-year deal might not be the best option in the current housing market. Whilst the base rate has remained low for nearly three years, the majority of economists predict that there wonít be an increase until 2015.
Ray Boulger, Senior Technical Manager at leading broker John Charcol, suggested that rates wonít increase for two years so there is ënot much pointí in taking a two year fixed mortgage out as a tracker mortgage could be more cost effective over the same period.
Compare mortgages with Money Expert.
End of the stamp duty holiday
Wannabe homeowners are scurrying to buy properties before the end of the stamp duty relief on March 24th.
Until then, first time buyers have been enjoying the luxury of not having to pay any stamp duty on properties between the value of £125,000 and £250,000.
Wendy Evans Scott, President of the National Association of Estate Agents, has warned buyers to make good use of the offer before itís too late. She stated; ìFirst time buyers must act quickly to avoid paying Stamp Duty Land Tax on their first home purchase.
ìIf you’re currently in a chain and waiting to complete your purchase then make sure that others in the chain know about the end of the tax holiday too. Good communication with your solicitor can help move the process forward, helping you beat the 24th March cut-off.”
After the stamp duty honeymoon period is over, buyers will have to pay 1% on properties up to £250,000 and 3% on properties over this value.
Buying a property can be expensive and the stamp duty is just one of the additional costs you may face.