The era of record-low mortgage deals appears to be over, with lenders hiking rates across the board.
In more bad news for those looking to get on the property ladder, it appears that first-time buyers – who usually have smaller deposits -have been hit the hardest.
According to new research from Moneyfacts, the average two-year fixed mortgage for someone with a 5% deposit has gone up from 4.16% in the past month to 4.26%.
By comparison, borrowers with a 40% deposit have seen rates rise from 1.66% to 1.69% over the same period.
Charlotte Nelson, finance expert at moneyfacts.co.uk, said: “This is disappointing news especially considering these borrowers could potentially have to factor in another rate increase if base rate rises as speculated.
“Many first-time buyers will be frustrated by the news that rates are rising while base rate has yet to do so. However, it goes to show that we don’t necessarily need to see a base rate rise for interest rates to increase
“When comparing the increases at 60% LTV to those at 95% LTV, the difference is stark. Providers are looking to remain competitive to those remortgaging and protect their mortgage books in the event of a rate rise, which is why rate rises at lower LTVs are being kept to a minimum.
“The combination of rates rising now and a potential base rate rise around the corner could see first-time buyers who’ve managed to get a deposit together having to deal with higher monthly repayments, which could eat further into their income, causing them struggle. Some borrowers turn to lengthening their mortgage term to combat these higher repayments, but this will cost them more in the long run.”
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