Whilst affordability remains the biggest stumbling block for those wishing to get onto the property ladder, interest rates have reduced and there are plenty of mortgage options available for first time buyers, according to financial service Defaqto.
Spokesperson Katie Brain explains: “We’ve seen a huge increase in first time buyers relying on help from family members to secure a mortgage. In fact, according to Savills, 164,000 first-time buyers had family assistance in buying their first home in 2023, accounting for 57% of all mortgaged first-time buyers. Although the number of Family Assist mortgages has reduced, there are still some available.
“With a security deposit mortgage, the friend or family member helping (helper) only guarantees the deposit or a set amount and is not liable for the whole mortgage. For example, they could guarantee £20,000 for a 10% deposit on a property worth £200,000. If the borrower does not keep up the mortgage repayments and the debt is called in, the helper is only liable for the £20,000 deposit and not the remaining £180,000 loan.”
There are three types of security deposit mortgage available on the market:
Collateral charge
This is where the helper gives a charge over some of the value of their home to provide security for the mortgage. For example, they could guarantee £20,000 against the value of their own home, without having to pay anything.
Linked savings deposit
This is where the helper has savings equivalent to the value of the deposit, e.g. £20,000 and is willing to tie these up as security for the mortgage. The helper would deposit their savings with the mortgage lender and would still receive interest on the deposit for a fixed period at the start of the mortgage (typically 3 to 5 years).
Offset savings deposit
These are similar to linked savings deposit mortgages, except here the interest earned on the savings is used to offset the mortgage interest. The helper would receive no interest on their cash and the borrower would benefit from a lower interest rate.
Katie Brain adds: “Another option is a Joint Borrower Sole Proprietor mortgage where multiple individuals can be named as borrowers (i.e. family or friend) but only one person is listed as the sole proprietor of the property. All borrowers are equally responsible for repaying the mortgage.”
The current best buys for Family Assist mortgages as researched by Defaqto are:
| Term | LTV | Provider | Product | Initial Rate Payable | Fees Payable | Security Deposit Types |
| 3 Year | 100% | Lloyds Bank | 3yr 4.70% Fixed LTV 100% Lend A Hand* | 4.70% | £0 | linked savings deposit |
| Halifax | 3yr 4.75% Fixed Family Boost LTV 100% * | 4.75% | £0 | linked savings deposit | ||
| 5 Year | 95% | The Family BS | 5yr 5.09% Fixed LTV 95% Family Mortgage | 5.09% | £599 | collateral charge, linked savings deposit, offset savings account |
| Barclays | 5yr 5.30% Fixed LTV 95% Family Springboard | 5.30% | £0 | linked savings deposit | ||
| 100% | Barclays | 5yr 5.54% Fixed LTV 100% Family Springboard | 5.54% | £0 | linked savings deposit |
There are also plenty of higher loan to value (LTV) mortgages available in the market for first time buyers, with or without the Government supported Mortgage Guarantee, and some lenders have launched new lending criteria or products specifically designed to help first time buyers.
Katie Brain explains: “Nationwide will consider lending six times the borrowers’ income and Skipton Building Society has launched a Track Record mortgage offering 100% mortgage to those borrowers who have a good track record of paying their rent.”
The current best buys for 95% LTV fixed rate mortgages as researched by Defaqto are:
| Term | LTV | Provider | Product | Initial Rate Payable | Fees Payable |
| 3 Year | 95% | Halifax | 3yr 5.39% Fixed LTV 95% Mortgage Guarantee | 5.39% | £0 |
| Coventry BS | 3yr 5.20% Fixed LTV 95% | 5.20% | £999 | ||
| 5 Year | Vernon | 5yr 4.94% Fixed LTV 95% | 4.94% | £0 | |
| Virgin Money | 5yr 4.99% Fixed LTV 95% | 4.99% | £0 | ||
| Leeds BS | 5yr 5.03% Fixed LTV 95% | 5.03% | £0 |
Katie Brain adds: “There’s also some uncertainty around the stamp duty threshold. It’s currently £425,000 for first time buyers but this could potentially drop to £300,000 in April 2025, depending on the budget announcements at the end of this month. If that’s the case, some first time buyers would go from paying nothing to paying an average £6,250 on stamp duty, in which case it could be worth trying to get onto the property ladder before these changes kick in.”
Contact one of our highly experienced mortgage advisors today on 0121 500 6316 to discuss your mortgage needs.
