First-time buyers pause plans due to pandemic but welcome 95% mortgage scheme

Our NerdWallet survey of the UK mortgage market delves into the challenges that homeowners have faced in getting a mortgage and reveals how the pandemic has affected the plans of prospective buyers.

John Fitzsimons, Denise Ko Genovese Last updated on 19 May 2021.
First-time buyers pause plans due to pandemic but welcome 95% mortgage scheme

UK property transactions more than doubled in March 2021 compared to last year, and demand to get on the housing ladder is strong. But, according to a NerdWallet study of homeowners and prospective buyers, 30% of first-time buyers have delayed their plans due to the pandemic.

Fierce competition coupled with the stamp duty holiday may be behind what has sent house prices soaring. The average price grew by 8.6% over the past 12 months, according to the Office for National Statistics. The higher price tags, compounded by difficulties in getting a mortgage and saving for a substantial deposit, have likely added to first-time buyer delays.

But there is hope on the horizon, with 24% of first-time buyers planning to purchase in the next 12 months, 61% in the next five years and 70% confident of having the keys to their own place by 2031.

The pandemic has affected all would-be property buyers in different ways. For some, plans will have been put on hold because of a change in their own financial circumstances, but for some others those buying hopes will have been paused because of how lenders have reacted to the crisis such as reducing the number of products open to buyers with small deposits and taking a more stringent approach to determining how much a buyer can borrow.

“The UK’s property market has bounced back strongly from the initial lockdown period, with house prices and transactional activity rising sharply. However, the pandemic and subsequent recession might have made mortgage applications more strenuous for prospective home buyers as lenders tighten their criteria,” says NerdWallet Director of Operations John Ellmore.

“Our research shows that the mortgage market can be difficult to navigate, underlining the importance for buyers to thoroughly prepare. Taking time to speak to multiple mortgage lenders and comparing different options online, for example, could save people time and effort when it comes to the actual application process, ensuring they do not pursue unrealistic options,” Ellmore adds.

Key Findings

  • Almost one third (30%) of first-time buyers have delayed their plans due to the pandemic though almost a quarter (24%) plan to purchase in the next 12 months and 61% in the next five years. Overall, 70% of first-time buyers are confident of having the keys to their own place by 2031.
  • First-time buyers are keen to take advantage of the government’s new 95% mortgage guarantee scheme with 57% considering using it.
  • Of all prospective buyers (existing and first-time), 10% have had a mortgage application rejected because they previously took advantage of loan repayment holidays; 10% have been rejected by a mortgage lender because of pre-existing debt; 8% have had an application rejected in the past because of their credit score; and 9% have been rejected without knowing why.
  • It takes an average of 4.1 years to save up for a house deposit with 51% of homeowners aged 18-34 receiving help from family and friends.

Saving for a deposit

Rising house prices have made saving for that deposit all the tougher, and what was enough for a 10% down payment on a property six months ago, may not stretch so far today. As a result, borrowers are turning to their loved ones for assistance. Our study found that more than one in three (38%) homeowners with a mortgage got some financial help from a friend or family member, with this figure jumping to more than half (51%) of those aged 18-34.

Our study revealed that current mortgage customers spent an average of 4.1 years putting together a sufficient deposit.

Getting together a sufficient deposit is vitally important for any would-be mortgage borrower. The larger the deposit, the more products you have at your disposal, while you’ll also enjoy lower interest rates on the mortgage itself.

Mortgage pain

For the vast majority of us, a mortgage is necessary for purchasing a home. Preparing for one can be tough.

Of the 2,000 homeowners and prospective buyers surveyed by NerdWallet, close to 50% said that they found the mortgage application process stressful, irrespective of whether they used a broker or not. And they devoted a whopping 22 hours to researching different mortgage options.

Stress levels can heighten if the lender turns down your application. A total of 10% of mortgage holders surveyed by NerdWallet said they were previously rejected because of existing debt, 8% said they had been rejected because of a poor credit score, and 9% said they were unclear about why they had been rejected. A further 12% said that they had been rejected despite receiving a mortgage in principle.

“This can be incredibly frustrating for mortgage applicants – especially when they are rejected for reasons that are largely beyond their control or simply unknown to them. Indeed, applicants who have taken advantage of loan repayment holidays as a consequence of the financial pressures caused by the pandemic may well find themselves unfairly targeted, given that use of such schemes was not meant to impact their ability to access credit in the future,” Ellmore says.

Mortgage help at hand

It is widely known that many aspiring mortgage borrowers find it difficult to build a sizeable deposit and do not have a wealth of borrowing options available to them as a result. So the April 2021 launch of the government’s 95% mortgage guarantee scheme, helping buyers acquire a property with only a 5% deposit, was well received – with 57% of those surveyed by NerdWallet saying that they would consider one of the products in the scheme.

“We are starting to see lenders come forward with mortgage deals designed for borrowers with a modest deposit off the back of the mortgage guarantee scheme, which is particularly welcome when you consider how few deals were open to borrowers in this position before. Nonetheless, it’s crucial to shop around and compare them carefully ‒ you may find that by taking a little more time to add to your deposit, you qualify for mortgage deals which are much cheaper in the long run,” Ellmore says.

Tips and tricks for getting a mortgage in the future

So if you’re hoping to buy, whether as a first-timer or as a homeowner moving up the ladder, what can you do to make the process more straightforward?

  • Get your credit record in decent shape ‒ Lenders want to get a good idea of not only your financial position, but also what sort of borrower you are and how likely you are to keep up with your repayments, and your credit record is a great way for them to get that insight. Encouragingly, around 40% of those surveyed said they had taken steps to improve their credit score before applying for a mortgage, which shows that there is awareness of just how important it is to chances of success.
  • Build a bigger deposit ‒ Having the widest range of options open to you is also important if you want to improve your chances. Borrowers with a 20% deposit will always have more potential products to choose from and more favourable terms than those with only a 5% deposit, for example.
  • Compare deals ‒ While heading to your local high street bank may seem like the simplest option, the reality is that there are far more lenders to choose from than just those with a branch presence. And by shopping around you not only have a better idea of which lenders will consider you, but you’ll also improve your chances of getting a cheaper rate. A mortgage broker can come in useful here as they have access to more lenders and products than direct borrowers – though bear in mind you will have to pay for their services.
  • Get help where you can ‒ Your research should also cover the help available to buyers like you, which can range from savings products designed to assist in building up a deposit like the Lifetime ISA, to schemes in place to make buying easier like shared ownership or the 95% mortgage guarantee scheme.


The market research was carried out between 23 and 27 April 2021 among 2,000 UK adults via an online survey by independent market research agency Opinium. Opinium is a member of the Market Research Society (MRS) Company Partner Service, whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The data sample of 2,000 UK adults is fully nationally representative. This means the sample is weighted to ONS criteria so that the gender, age, social grade, region and city of the respondents corresponds to the UK population as a whole. Of the sample, 802 owned a property outright, while 547 owned a property with a mortgage.

Image source: Getty Images

About the authors:

John Fitzsimons has been writing about finance since 2007. He is the former editor of Mortgage Solutions and loveMONEY and his work has appeared in The Sunday Times, The Mirror, The Sun and Forbes. Read more

Denise is Senior Editor at NerdWallet. Previously at Debtwire and Unquote, she is a seasoned journalist and editor with her articles on the distressed debt market published on Forbes and Read more

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