First-time buyers are increasingly considering tracker and variable-rate mortgages as higher fixed rates put pressure on affordability, according to new industry figures.
The number considering tracker and variable deals has tripled since February, while average two-year fixed rates at 90% loan-to-value rose from 5.09% to 5.74% by June.
With mortgage choice becoming increasingly important for buyers with smaller deposits, conveyancing specialist Montrose Brown Law says first-time buyers should also focus on getting financially and legally prepared before making an offer.
Eve Cooke (main picture, inset), Managing Director at Montrose Brown Law, says buyers should start by developing a realistic deposit plan and ensuring they can demonstrate where their funds have come from.
PREPARE EARLY
She says: “Chasing the lowest headline rate is understandable when budgets are tight, but it shouldn’t be the only decision that matters.
“Getting on the ladder for the first time is about the whole package: your deposit, your legal preparation, and how ready you are to move quickly once you’ve found the right property.”
Cooke says evidence may be required for savings, Lifetime ISAs and gifted deposits as part of anti-money laundering checks, meaning gathering documentation early can help prevent delays.
She also recommends obtaining a mortgage agreement in principle before seriously searching for a property and instructing a conveyancer early rather than waiting until an offer has been accepted.
“Buyers often leave the legal side until after an offer is accepted, but starting ID checks and initial paperwork sooner means far fewer delays once you find the right property,” she says.
WATCH MORTGAGE TERMS
Buyers considering tracker mortgages should also pay close attention to the conditions attached to their mortgage and how long an offer remains valid.
Cooke says: “Whatever type of deal you go for, look closely at the conditions on your mortgage offer and how long it stays valid for.
“If the legal work drags on and that offer lapses before you exchange contracts, you may have to go back to your lender and start again.”
She also urges buyers to budget beyond their deposit, including for Stamp Duty where applicable, surveys, legal fees and moving expenses.
“The mortgage decision gets a lot of attention, but a slow or disorganised legal process is just as likely to hold up a sale,” Cooke adds.
