The reason why the government’s 95% LTV mortgage scheme for first time buyers has proved so popular has been highlighted by new research.
The joint data from credit reference agency giant Equifax and rent recognition platform CreditLadder reveals that not having a deposit is why just over a third of wannabe first time buyers have not been able to get on the property ladder.
First time buyers are not short of help – the research shows those canvassed had looked at the available schemes including Help to Buy (62%), shared ownership (26%), right to buy/right to acquire (18%) and starter home schemes (18%).
But many of these schemes require first time buyers to scrape together some sort of cash deposit, which a recent Halifax study showed to have jumped by £12,000 over the past 12 months to £59,000.
This increase has been caused by the complete disappearance of low-deposit first time buyer mortgages from the market during Covid, which the government scheme is designed to re-instate.
Lisa Hardstaff (pictured), Head of Customer Experience at Equifax says: “The research clearly demonstrates the barriers first-time buyers are facing.
“But it is not just about how much you can afford, the deposit raised or what type of mortgage is required – first-time buyers need to be ‘mortgage ready’ when it comes to their credit information too.”
Both Equifax and CreditLadder claim that the elephant in the room is that many mortgage applicants have ‘thin’ credit histories, and that by reporting rent through CreditLadder and services like it, tenants can become ‘mortgage ready’ and get the best mortgage deals in the market.
Sheraz Dar (pictured), CEO of Creditladder, says: “The inclusion of rental data in mortgage assessments is a huge lift to improve financial inclusion and fairer access to the right financial products”.
“This data insight provides lenders with a much more reflective picture of renters’ ability to manage their finances.
“Renters who make full and timely monthly payments should see a significant benefit in proving their ability to repay a commitment, just like mortgage payers.”