New research by Defaqto has revealed a rise in the number of mortgages for borrowers with small deposits.
And while interest rates on mortgages are rising in general, deals which are aimed at first-time buyers have recently got cheaper, the financial information business has found.
It comes just as research by Moneyfacts.co.uk identified the market had got more competitive for buyers with 5% deposits who therefore needed to borrow 95% of the property’s value.
Indeed, Defaqto’s research found a similar trend, and discovered the average rate for a two-year fixed rate mortgage with 95% loan-to-value (LTV) had fallen from 3.98% in the past year to 3.46%.
House price slowdown
Meanwhile, house price data from the Office for National Statistics (ONS) today revealed a rise the cost of the average home by 2.5% in the year to December, which is slower than the 2.7% increase experienced in the previous year.
All other house price index data shows there has been a general slowdown in growth, particularly in London and the South East where, in some places, there has been a fall in prices.
Brian Brown, head of insight at Defaqto, said: “Buying a home is a huge investment and high prices have kept it out of the reach for many years.
“It looks like the cost of buying a home has just got a bit easier for first-time buyers as prices have finally stopped rising and mortgages are cheap.”
Schemes to help first-time buyers
It’s not just competitive mortgage rates and slowing house prices which are working in first-time buyers’ favour. There are currently a number of initiatives available for first-time buyers to support their bid for homeownership including Help to Buy and Lifetime ISAs.
Dilpreet Bhagrath, mortgage expert at Trussle, said: “For new buyers, the current low interest rate climate coupled with the Government’s commitment to extension of the help-to-buy scheme will offer support for those hoping to get a foot on the ladder.
“For the slightly more cautious first-time buyers, opting for fixed-rate mortgage deals might be favourable, giving complete clarity over how much your mortgage costs each month so that you can plan ahead.”
Advice
Defaqto’s advice to those considering purchasing their first home is to do your sums and check exactly what you can afford to borrow.
Brian Brown explained while interest rates were low, a hike of just 1% could add hundreds of pounds to your monthly repayment and thousands to the overall cost of the home.
“It’s important to factor in what an increase could mean for your mortgage and whether you can afford it,” he said. “If you need advice, talk to a qualified adviser who can recommend the best product for your needs.”
