First -time buyer mortgage

First-time buyer market is robust and ready for Spring

Started to look for your first home? Then check out this article by Moneyfacts for some interesting insight into the current market.

In just a couple of weeks’ time, Spring will arrive, which is typically the time of year when house hunters start searching for their ideal home as many more houses become listed for sale. Once first-time buyers have built up a big enough deposit to get themselves onto the property ladder, the next port of call is to find the right property and to pick the best mortgage.

The latest research from Moneyfacts.co.uk can reveal that buyers who have only a 5% deposit will have a much healthier number of deals to choose from than in years gone by. Despite the closure of the Help to Buy Mortgage Guarantee scheme, it’s still a robust market that has the potential to keep growing.

Max 95% loan-to-value Feb-12 Feb-16 Feb-17
Two-year fixed average 5.93% 4.26% 3.98%
Five-year fixed average 5.89% 4.76% 4.43%
Total number of deals 59 253 276

 

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“The first-time buyer mortgage market has gone from strength to strength over the years boosted by Government support. In previous years, there had been a lack of competition for those considered more risky, due to the small amount they could put down as a deposit. Prospective buyers today have so many more cost-effective mortgage options available, potentially making their dream of owning their first home much more achievable.”

 

“Five years ago, long before the Help to Buy Mortgage Guarantee Scheme launched, there were only 59 deals available to buyers with a 5% deposit, from just 24 lenders – 75% of which were mutuals. Today, the number of deals has rocketed to 276 with 53 different lenders, including most of the largest high street banks.”

 

“It’s not just the available choice that will benefit first-time buyers, there’s also a huge reduction in the cost of a mortgage, with two and five-year fixed rates for those with a 5% deposit falling from 5.93% and 5.89% to 3.92% and 4.43% respectively over the last five years. Based on the average five-year fixed rate, that’s a difference of £7,715.40* in terms of repayments during the first five years of the mortgage.”

 

“Borrowers hoping to reduce the expense can also take advantage of lucrative incentive packages, such as the Best Buy deal from Hanley Economic Building Society, priced at 3.40% for two years, which has a £500 fee and an incentive package of free valuation and £250 cashback. Not only this, but the biggest banks are also looking to entice first-time buyers – demonstrated by Barclay’s offer to pay up to £2,500 in cashback to reimburse the stamp duty charge on a £250,000 home.”

 

“Obviously, there are advantages for those first-time buyers who waited until now to get the best mortgage deal, yet there are also some significant disadvantages to buying a home today compared to years past. House prices are continuing to rise, so prospective buyers may well be struggling to amass a large enough deposit, particularly if a large portion of their income goes to rent. With this in mind, borrowers would be wise to be stringent with their daily finances, be on the lookout for the best mortgage deals and seek independent financial advice before entering into any arrangement.”

*£150,000 borrowed over 25 years, ignoring any other costs or fees. The money saved is based on the first five years of the fixed deal on the average five-year fixed rate in February 2012 versus February 2017.

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Charlene Gentile

About the Author Charlene Gentile
Charlene is our digital marketing specialist. She has a wealth of marketing experience and is looking to help communicate the variety of services we have here at The Hanley.

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