New mortgages could help first time buyers borrow 52000 more says lender

A building society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings, with the launch of a new mortgage range.

Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings, Leeds Building Society said.

Its previous maximum loan-to-income ratio was 5.25 for first-time buyers and 4.5 on its standard mortgage lending to other borrowers.

Based on its lending during the spring and summer this year, the society estimates that first-time buyers could potentially borrow up to £52,000 more on average compared with its previous maximum loan-to-income ratio for this group.

It said it has also made improvements in assessing how much borrowers can afford to repay.

Single and joint borrowers, including those who are self-employed, will potentially be eligible for the society’s new Income Plus mortgages, with a minimum 5% deposit needed or a 15% deposit for new-build flats.

The deals will be available through brokers and intermediaries and they are all five-year fixed-rate products.

The products include a mortgage at 4.40% for borrowers with a 25% deposit, with a £999 product fee, as well as a deal at 5.19% for borrowers with a 5% deposit, with no fee.

David Hollingworth, associate director at L&C Mortgages, said: “We know that first-time buyers are not only grappling with building a deposit but also with the affordability constraints that high house prices bring.

“Income Plus seeks to address this by providing an alternative option for those with a smaller deposit but importantly also enabling a higher borrowing amount for those that can demonstrate it will be affordable.”

David O’Leary, executive director at the Home Builders Federation, said: “The lack of appropriate mortgage finance is a key barrier for many households who would otherwise be able to take their first steps on the housing ladder and this suppression of effective demand for new homes is holding back housing delivery.”

The launch comes ahead of stamp duty changes in England and Northern Ireland from April 2025, which will reduce the “nil rate” stamp duty threshold for first-time buyers to £300,000 from £425,000.

Aneisha Beveridge, head of research at property firm Hamptons, said: “The number of sales being agreed is ending the year strongly as buyers look to secure a home ahead of the stamp duty rise next year.

“But the window to lock in a pre-April 2025 completion is closing quickly.

“The chance of a sale agreed in December reaching completion before next April is now close to a coin flip. Sales that are part of long chains or where management companies are slow to respond to inquiries are now likely to incur higher stamp duty bills.

“Historically, only 37% of purchases agreed in January go on to complete by April of the same year.

“Buyers are beginning to factor in the cost of higher stamp duty bills and recent small increases in mortgage rates by pushing for bigger discounts, and often sellers, who are keen to agree a deal before Christmas, are accepting.

“However, those purchasing more expensive homes have been less sensitive to the change.”

According to Hamptons’ data, the average buyer who had an offer accepted in November 2024 negotiated a median average discount of £5,000 off the asking price.

This is the biggest discount since December 2023 and has doubled from £2,500 in October 2024, according to Hamptons, which uses data from around 550 estate agency branches across Britain that form part of its parent company, the Connells Group.

Published: 05/12/2024 by Radio NewsHub