Buyers with a 10 per cent deposit have one day to secure a mortgage from TSB

First-time buyers desperate to get on the housing ladder while the stamp duty holiday remains in place are being forced to compete for mortgages in a mad scramble. 

Lenders are now so cautious about lending to first-time buyers with just a 10 per cent deposit that they are limiting this type of lending to one day fire sales.

TSB is the latest bank to offer small deposit mortgages for a limited time, with its 90 per cent loan-to-value deal open to applications today until 5pm only.

Would-be buyers looking to purchase a flat will be left disappointed, however, as the deal is only being offered on houses. 

Mortgage experts say this type of ‘flash sale’ is only going to get more common. 

Andrew Montlake, of mortgage broker Coreco, said: ‘We will definitely see more of these flash sales as lenders look to help first-time buyers, but for short periods of time. 

‘Lenders are worried that if they open themselves up at this level for longer they will be inundated with applications and unable to cope.’ 

It comes at a tough time for first-time buyers as most lenders have already pulled riskier low deposit deals as the economy seized up over lockdown.

Nationwide is the last remaining big lender to offer 90 per cent LTV deals on a full time basis, but is already being more restrictive about who it lends to, insisting borrowers have good employment records, clean credit and can demonstrate they can afford to repay the loan.

Coventry Building Society has also been offering mortgages for buyers with a 10 per cent deposits, but only in three day bursts. 

Similarly broker-only lender Accord – part of Yorkshire Building Society – offered these deals recently but only over a 48-hour window. 

Montlake added: ‘The issue with this is that first-time buyers will not know when or where these new products will appear unless they happen to be lucky with the lender they approach or they are dealing with a professional mortgage broker who will keep on top of these notifications and are able to swoop in to lock the product for their clients.

‘It is not a perfect scenario by any means but it better to have a little of something than a lot of nothing.’  

TSB’s time limited five-year fixed deal is available today only, to those with a 15 or 10 per cent deposit.

It can’t be used to buy a flat – only houses allowed – and can’t be used for a loan larger than £350,000.

Applications are now open and will be until 5 o’clock, unless the bank receives the maximum number of applicants earlier than that.

The lender gave only a day’s notice for the deal, meaning buyers won’t have known it was available until the last minute.

In future this leaves those with small deposits in the unenviable position of having their options severely limited and not being able to plan for when new deals come onto the market.

As of this Friday there were just 51 deals available to those with a 10 per cent deposit from 10 lenders, down from 772 before lockdown was implemented, according to finance experts Moneyfacts.

Lenders have mostly blamed staffing shortages forcing them to rein in new mortgage lending and focus on existing customers, with the majority of the country still working from home and a wave of customers requesting mortgage holidays.

Lower deposit mortgages usually take more work to underwrite, as they present a higher risk to the lender. As a result, if staffing problems at banks and building societies lead to deals being cut, it’s these deals that go first.  

But it’s likely lenders are also taking a more cautious approach to who they lend to as they watch to see how the economy fares and, crucially, what happens to house prices over the next 12 months given the number of people losing their jobs and the furlough scheme set to end at the end of October.