First-time buyer mortgages: Which lenders offer the lowest prices?

Innovative schemes such as Skipton Building Society’s deposit-free Track Record mortgage and Yorkshire Building Society’s £5k deposit deal mean the mutuals are pioneering the way for those stepping on the property ladder.

But Moneyfacts said, when comparing mortgages first-time buyers would find building societies on average priced lower than the market averages on fixed rate products for 90% and 95% loan-to-value. These are deals which require 10% and 5% deposits, respectively, and therefore most likely to be aimed at first-time buyers.

For example, a first-time buyer who had a 10% deposit would need a mortgage for 90% loan-to-value (LTV). If they were to choose a two-year fixed rate with an LTV of 90% the typical rate available across the whole mortgage market would be 6.20%.

Building societies, however, average at 5.76% for the same deals.

How does this compare to the high street banks?

The lowest fixed rates typical hail from the high street banks – Barclays, Halifax, HSBC, Lloyds Bank, NatWest, RBS and Santander.

Moneyfacts data showed they were priced lower, on average, than mutuals.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, explained these banks traditionally had more margin to price their mortgages lower.

But she added: “The lowest rate deal may not be the best choice when all the costs and incentives associated with the mortgage are included.

“Saving money on the upfront cost of a mortgage is incredibly important for first-time buyers who may have exhausted their cash on a deposit, legal fees and moving costs.”

However, even with these lower prices, first-time buyers still struggle with affordability, something the building societies have highlighted recently in a major report which found first-time homeownership is more expensive than it has  been in 70 years.

First-time buyer mortgage deals

And this is where looking for specific deals aimed at first-time buyers can be really helpful.

Springall said: “Mutuals have made various efforts to be innovative, such as the Track Record mortgage from Skipton Building Society, the £5,000 deposit mortgage from Yorkshire Building Society and the partnership between Leeds Building Society and Experian to potentially help consumers to boost their credit score.

“Even with such innovation, a recent study by Coventry Building Society for Intermediaries noted ‘regional differences are acting as barriers’ to those looking to step onto the property ladder for the first time.

“Any borrower looking to get their foot on the property ladder would be wise to seek independent advice to ensure they find the right deal for them.”