Mortgage options for first-time buyers have shrunk since early March as lenders withdrew products due to the fallout from the war in Iran.
According to the latest data from Moneyfacts, mortgage product choice for all customers has fallen by around 10% over the past two months.
Deals for those with 10% or less down payment or equity – most likely to be used by first-time buyers – fell by 14%.
In March, mortgage rates soared and the number of deals fell rapidly. While Moneyfacts data shows some recovery in April, as lenders began cutting prices and some mortgages came back onto the market, higher Loan-to-Value (LTV) options remained scarcer.
Rachel Springall, financial expert at Moneyfacts, said: “Borrowers may be feeling some relief from the lull following the absolute mortgage crisis, but first-time buyers are being hit hardest.
“Lenders slowly came back with deals and moved to cutbacks on increases in April.
“Unfortunately, there is still much more room for improvement as product choice is still down around 10% since the start of March as less than half of the lost deals have returned.
“First-time buyers will be frustrated to see that the choice of higher Loan-to-Value (LTV) options has fallen by 14% since the beginning of March (90%, 95% and 100% LTV).”
Springall explained how global pressures caused by the conflict in the Middle East completely reversed the expected path of inflation and future interest rate fixing, leading to lenders cutting deals and raising fixed rates.
As a result, first-time buyers or those with small equity of just 5% hoping to secure a two- or five-year fixed deal will find the average fixed interest rate remains above 6%.
“It is vital that first-time buyers in particular feel supported to keep the market moving, but affordability issues are clearly visible,” Springall added.
She added: “It is wise to seek advice from an estate agent to keep up to date with the latest deals and get valuable advice on affordability constraints.”