Good News for First Time Buyer Mortgages

Housebuilders and mortgage providers are talking about how they can work together to provide 95 per cent mortgages to help thousands of first-time buyers

One scheme under consideration could see housebuilders create a fund which would be ring-fenced for each housebuilder and the fund would probably have a finite lifetime. This fund could be used by banks to underwrite mortgages for up to 95 per cent of a property’s value.

 Creating the fund would also help the banks to meet their increased capital ratio requirements — in which they have to set aside more capital for low-deposit loans — and reduce their risk in the event of mortgage default.

In exchange, the housebuilders would want the banks to reduce their credit risk scoring criteria when mortgage providers such as Ulster bank assess first-time buyers for a mortgage on a newly built home.

Ulster Bank is currently offering Co-Ownership mortgages to residents in Northern Ireland - in which the scheme allows people to buy at least half of a property (which is valued up to a maximum of £175,000). The remainder is financed by the housing association Co-Ownership Housing as and in return you pay Co-Ownership Housing a monthly rent for this portion. There is no need to save for a deposit.

Moneyfacts, the financial research group, said that there was an urgent need for lenders to provide products for first-time buyers.