A new year and a new approach for new borrowers.

A lot can change in a few months. In spite of the bond market wobble that followed the Chancellor Rachel Reeves’ first Budget, speaking to brokers and lenders at the end of last year, the market seemed relatively upbeat about rates.

General consensus was that there would be perhaps three or four cuts in the base rate this year, taking it down from 4.75 per cent to 4 per cent. There are those in the market still holding to this view, with some even predicting base rate to fall to 3.5 per cent by the end of this year. [1]

Markets overall are a lot less sure, however, and are predicting just one cut to base rate over the coming 12 months – in February. We have just had inflation figures that indicate higher price rises than expected, while global markets have devalued the pound and sent gilt yields soaring. Over the past year, 10-year gilt yields are up almost 30 per cent.[2] Swap rates are also up, which will feed into mortgage rates.[3]

The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 3.5 per cent in the 12 months to November 2024, up from 3.2 per cent in the 12 months to October, according to the latest figures from the Office for National Statistics.[4]

As is typical for January, there has been a flurry of mortgage rate reductions for lower loan-to-value bands but on average rates are unlikely to fall meaningfully any time soon.

Rents keep rising and for the majority of would-be first-time buyers who have been would-be buyers for longer than they probably care to think about, the prospect of saving bigger and bigger deposits while more of their disposable income is consumed by the cost of living is pretty tough to take.

The hardest thing to swallow is that none of this is their fault – they’re victims of circumstance and the times we now live in. This shouldn’t mean their hopes of becoming homeowners should be dashed however.

At Vida, we consider it partly our responsibility to move the mortgage market on to a place where the products we offer are fit for the world today.

We’ve put our money where our mouth is too. The new year brings with it a new opportunity for first-time buyers who have good affordability measures but can’t realistically build up a deposit equal to their annual salary. We've created 3 & Easy to help your clients into the home they want to own, sooner than they hoped they could with this deal - a 97 per cent loan-to-value mortgage.

They won’t have to compromise on loan size, with the maximum loan available up to £750,000. We’ve also allowed for a term up to 45 years to ease affordability pressures, particularly for younger borrowers early on in their careers. Clients can choose from five-year and seven-year fixed rates, with a fee saver option available. They will also benefit from access to Vida's flexible criteria, which covers adverse credit history, complex incomes and second job income, self-employed and contractors.

This year is shaping up already to promise some bumps for borrowers but the underserved nature of many large cohorts means we need to think more differently about how we can help. 3 & Easy is part of that approach.

1. How Much Will The Bank of England Cut Interest... | Morningstar
2. UK 10 year Gilt Bond, chart, prices - FT.com
3. UK 10 yr Swap, SB6L10Y=X:FSI Summary - FT.com
4. Consumer price inflation, UK - Office for National Statistics