COVID 'created challenging conditions' for UK mortgage market

·3-min read
BLACKBURN, ENGLAND - APRIL 29: Placards from various housing estates agents advertising properties for sale on April 29, 2021 in Blackburn, England. (Photo by Nathan Stirk/Getty Images)
UK banks launched a new government-backed scheme aimed to help first-time buyers, or current homeowners, secure a mortgage with just a 5% deposit. Photo: Nathan Stirk/Getty Images

The coronavirus pandemic has halted home ownership plans for prospective first-time British buyers.

Three in 10 prospective homebuyers have paused plans to purchase their first property as a result of COVID-19, a new study from NerdWallet has revealed.

The survey of 600 Brits who do not currently own a property but aspire to found 24% of respondents expect to purchase their first home within the next year.

Nearly one third (30%) of prospective first-time buyers delayed their plans to purchase a property because of COVID-19, but 70% of hopeful buyers are confident they will purchase a home within the next 10 years.

"COVID-19 has created challenging conditions for the UK mortgage market," said John Ellmore, director of operations at NerdWallet. "The resulting economic volatility has led some mortgage providers to tighten their lending criteria and, as such, some first-time homebuyers may find securing a mortgage more challenging than they may otherwise have done."

Meanwhile, 57% are considering, or planning to take advantage of the government-backed 95% mortgage. A further 35% expect to receive financial help from a family member, guardian, friend or partner to pay for their house deposit.

"Positively, however, Britons appear to be taking steps to prepare themselves for mortgage applications – and this should be a sign of better things to come," Ellmore added.

Read more: Everything you need to know about 95% mortgages

UK banks launched a new government-backed scheme aimed to help first-time buyers, or current homeowners, secure a mortgage with just a 5% deposit.

The scheme which opened for applications in April, follows prime minister Boris Johnson’s pledge to help turn “generation rent into generation buy” at the Conservatives’ party conference last October.

95% mortgages mean that first-time buyers or current homeowners are able to secure a mortgage with just a 5% deposit for a house up to the value of £600,000 ($846,450).

The UK government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The 95% mortgage guarantee is available from lenders on high streets across the country, with Lloyds Banking Group (LLOY.L), Santander (BNC.L), Barclays (BARC.L), HSBC (HSBA.L) and NatWest (NWG.L) launching mortgages under the scheme today.

Britain's housing market, boosted by the stamp duty tax break and the 95% mortgage guarantee scheme for first-time buyers, has surged to record highs amid the pandemic.

UK house prices rose at the fastest pace in nearly 14 years in March after Sunak announced the extension of the stamp duty holiday. Property prices increased 10.2% in the year to March 2021, up from 9.2% in February this year. This was the highest annual growth rate the UK has seen since August 2007, according to official figures.

Watch: How much money do I need to buy a house?

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