This is according to analysis by Mortgage Advice Bureau (MAB) which showed that thanks to easing mortgage affordability tests, improved lender flexibility and changing market conditions, buyers can now take out larger loans than before.
However, many still underestimate their ability to borrow, with a survey of 1,000 people finding that up to 50% did not know these improvements in mortgage access had been implemented over the past year.
In fact, MAB research finds that many aspiring buyers are making decisions based on outdated assumptions about affordability and borrowing potential, despite changing lending conditions.
These include potential first-time buyers surveyed by MAB
- 50% of respondents were unaware of improved borrowing capacity, with some buyers likely to be able to borrow between £30,000 and £40,000 more than last year
- 27% said saving for a deposit was the biggest barrier to purchasing
- 73% were not aware of the existence of 5% mortgages.
Outdated perceptions hold back many potential buyers
MAB’s research also raised concerns that many first-time buyers were delaying homeownership due to “outdated perceptions” around deposits too.
Survey respondents spent an average of 6.04 years saving for a deposit.
But, as lenders’ affordability standards continue to evolve, some aspiring buyers may now be in a stronger position to buy than they realise, MAB explained.
MAB Research It also found that 47% of aspiring buyers would consider buying immediately if their mortgage repayments were similar to what they are currently paying in rent. This suggests that many continue to evaluate the affordability of homeownership primarily through the lens of monthly housing costs.
Rachel Geddes, Director of Strategic Lender Relations at Mortgage Advice Bureau, said: “For many first-time buyers, the biggest challenge isn’t just saving up for a deposit – it’s knowing whether home equity is actually within reach.
“What this research shows is that many aspiring buyers may still be making decisions based on outdated assumptions about their borrowing potential, as lenders continue to offer greater flexibility in the market.
“While affordability pressures certainly remain, speaking to a mortgage advisor early in the process can help buyers better understand their options, rather than ruling themselves out too early.”
Mortgage options for first-time buyers with low deposits
Not only are mortgage brokers offering encouragement to aspiring homebuyers, lenders are also urging potential borrowers to consider the many options available to first-time buyers.
Rachel Honeysett, director of mortgage distribution at April Mortgages, was among them. The lender launched a 100% no deposit mortgage in May last year.
“The mortgage landscape has changed dramatically in the past 12 months alone,” she said.
“Affordability standards have expanded, lender flexibility has improved and higher loan-to-value options, up to 100%, exist, which many first-time buyers are unaware of.
“This knowledge gap is the difference between dreaming away and having the keys to your first home in your hands, as this research by MAB highlights.”
“The biggest risk now is that buyers are ruling themselves out before they explore their options, based on outdated assumptions.”
Prime lenders also offer solutions for first-time buyers. Lloyds, Halifax and Bank of Scotland this month launched a mortgage for those who apply for the property with just a £5,000 deposit.
Amanda Bryden, who heads up the team at Halifax Intermediaries & Scottish Widows Bank, which is behind this mortgage, said: “With so much choice, it’s easy to underestimate what might be possible, but speaking to a mortgage advisor can bring clarity and confidence, and help you understand what you can achieve.
“So, if you’re thinking about buying, I would say now is a good time to have that conversation.”
