From building societies offering no or low deposits to lenders offering longer and flexible repayment terms to shared ownership mortgages, there is a range of options for potential homeowners.
But according to new research from the Building Societies Association (BSA), many potential buyers don’t realize there could be solutions to the low deposit and affordability challenges they face.
The research shows that almost half (47%) of people looking to buy their own home have never spoken to a lender or mortgage broker to see what options are available to them. Even among those who have, about half (46%) have not done so in the past year.
But when shown options from building societies that require no or few deposits, two-thirds (67%) of those trying to get a foot on the property ladder said they could buy a home sooner than they thought, highlighting a clear gap between perception and reality.
Paul Broadhead, head of mortgages and housing policy at the BSA, said: “A simple conversation with a building society or mortgage broker can open doors you may not have realized were there.”
The barriers first-time buyers face are well documented; the BSA’s research dug deeper and found that a whopping 59% have less than £10,000 in savings. They think it will take an average of six and a half years before they can buy their first home.
One in three believes they will never own their own home. The biggest challenges are financial, with affordability (64%) and saving a down payment (53%) cited as the top barriers.
What options are there for starters who are struggling?
However, according to the BSA, there may be some useful options to address these challenges in building societies.
This also applies to loans without or with low deposits. A well-known example of this is Skipton Building Society’s 100% Track Record mortgage, a deposit-free deal for those with a strong history of rent payments.
Shared ownership is another option that many first-time buyers haven’t considered. Here buyers purchase a percentage of the property and rent the rest. This means they need a smaller down payment, making homeownership more accessible. Leeds Building Society is a strong player in this market.
There are also building societies that offer longer and flexible repayment terms and can provide tailor-made and practical solutions for individual first-time buyers, who may get a ‘no’ from an automated lender.
The BSA said building societies accounted for 35% of all starter loans. Almost half (46%) of this was for borrowers under 30 years of age, almost a quarter (23%) for borrowers with a down payment of less than 5% of the house price, and 10% for first-time buyers over 45 years of age.
Paul Broadhead added: “Too many would-be first-time buyers assume that home ownership is off the table without ever checking what is actually available to them. This research shows this is a mistake!
“When people research what types of mortgages mortgage banks offer, many realize they can buy sooner than they thought.”
Meanwhile, Lucy Rigby KC MP, Minister for Economy at the Ministry of Finance, said: “Too many people give up owning a home before even speaking to a lender – believing that getting the keys to their own home is out of reach.
“But with more attractive and flexible products on the market, it is right that people are encouraged to take another look to see if there might be an option that works for them.”