How first-time buyers could be hardest hit by Iran war mortgage turmoil
The average lifespan of a mortgage product on the market extended significantly in early May, according to a financial information website, providing some respite to borrowers looking for new deals.
However, potential first-time buyers may still face difficulties in securing favorable terms.
This recovery followed a period of financial instability largely attributed to the conflict in the Middle East, during which many mortgage products were withdrawn. Although some deals are gradually re-emerging, the market remains unstable.
According to Moneyfacts, the typical mortgage product remained available for 16 days before being withdrawn in early May; This was a significant increase from the eight-day average shelf life recorded just one month earlier in early April.
Despite this extension, the overall selection of mortgage products has decreased by approximately 10 percent since March. More importantly, deals requiring a deposit of 10 per cent or less, which is vital for most first-time buyers, saw an even sharper decline of 14 per cent, further exacerbating the challenges for those entering the property market.
Moneyfacts finance expert Rachel Springall said: “First-time buyers will be disappointed to see higher loan-to-value (LTV) options have fallen by 14 per cent since the start of March.
“Global pressures caused by the conflict in the Middle East have completely reversed the expected course of inflation and future interest rate determination, causing lenders to withdraw agreements and increase fixed interest rates.
“Fortunately, the calm of crop loss in April compared to the turmoil in March has resulted in the average shelf life of a deal returning to a more realistic range, doubling from around a week to just over two weeks.
“First-time buyers, or those with very little equity of just 5 per cent, hoping to secure a two- or five-year fixed deal will find average fixed rates remain above 6 per cent.
“It is crucial that new buyers, in particular, feel supported to keep the market moving, but affordability challenges are evident.
“Higher interest rates, a lack of affordable housing, and the potential for increased cost of living can all hurt the mortgage market.”
Ms Springall added: The strain of higher payments will cause borrowers to consider a longer-term deal, such as 35 years or 40 years, to make initial payments more manageable.
“But this generally means paying more interest, so it would be wise to overpay where possible to reduce debt and mortgage term.”
NAEA (National Association of Realtors) Propertymark chief executive Mary-Lou Press said: “While the mortgage market has calmed somewhat after recent volatility, first-time buyers still face significant pressure.
“Interests have fallen marginally but affordability remains strained, especially for those with smaller deposits.
“Indeed, buyer demand remains resilient but affordability challenges are clearly influencing purchasing decisions.
“Many buyers are being more cautious, re-evaluating budgets, extending timelines or looking at smaller properties and different locations to make homeownership possible.”
He added: “As financial criteria and lenders’ appetites continue to change, it is vital for borrowers navigating the current environment to seek professional mortgage advice.”
