First-time buyers are continuing to face mounting affordability pressures despite signs of stability returning to the mortgage market according to the latest Moneyfacts UK Mortgage Trends Treasury Report.
The data shows mortgage product availability remains significantly lower than it was at the start of March, particularly for borrowers with smaller deposits.
Overall mortgage choice increased by 583 products during April, partially recovering after lenders withdrew 1,283 deals the previous month amid uncertainty around interest rates and inflation expectations linked to conflict in the Middle East.
However, product choice across the market remains around 10% below levels seen at the start of March, while higher loan-to-value products aimed at borrowers with deposits of 10% or less have fallen by 14%.
STRETCHED AFFORDABILITY
The figures highlight ongoing challenges for first-time buyers, many of whom are already struggling with rising rents, stretched affordability and difficulties saving for deposits.
Mortgage pricing eased slightly during April, with the average two-year fixed rate falling to 5.78% and the average five-year fixed rate dropping to 5.68%. Despite this, both remain notably higher than they were at the start of March.
Average rates for borrowers with 5% deposits also remain above 6%, adding further strain for new entrants to the housing market.
Moneyfacts said mortgage market volatility also eased during April, with the average shelf-life of a mortgage deal doubling from eight days to 16 days as lenders slowed the pace of repricing and product withdrawals.
ROOM FOR IMPROVEMENT
Rachel Springall, Finance Expert at Moneyfacts, says: “Borrowers may feel partially relieved by the period of calm after absolute mortgage mayhem, but first-time buyers bear the brunt. Lenders slowly brought back deals and shifted to making cuts over hikes during April.
“Unfortunately, there is much more room for improvement, as the product choice overall is still down by around 10% since the start of March, as less than half the deals lost have returned. First-time buyers will be frustrated to see the choice of higher loan-to-value (LTV) options drop by 14% since the start of March (90%, 95% and 100% LTV).”
GEOPOLITICAL PRESSURES
And she adds: “The global pressures caused by the conflict in the Middle East completely flipped the expected path of inflation and future rate setting, which caused lenders to pull deals and hike fixed rates.
“Thankfully, the calm of product churn during April compared to the upheaval in March, resulted in the average shelf-life of a deal returning to a more realistic window, doubling from around a week to just over two weeks.
“It is understandable to see why affordability for borrowers continues to be stretched, incomes are not stretching far enough to acquire a mortgage and those trapped in the rental cycle struggle to build a sizeable deposit.”
AFFORDABILITY PRESSURES
Mary-Lou Press (main picture, inset), President of NAEA Propertymark (National Association of Estate Agents), says: “While the mortgage market has calmed slightly after recent volatility, first-time buyers are still facing significant pressure. Rates have eased marginally, but affordability remains stretched, particularly for those with smaller deposits.
“On the ground, buyer demand remains resilient, but affordability challenges are clearly influencing purchasing decisions. Many buyers are becoming more cautious, reassessing budgets, extending timelines, or looking at smaller properties and different locations to make homeownership achievable.
“There is still a clear need for more support for first-time buyers through greater lender innovation, competitive high loan-to-value products and improved housing affordability. For borrowers navigating the current environment, taking professional mortgage advice remains crucial as financial criteria and lender appetite continue to shift.”
