Mortgage rates for first time buyers at their lowest in the last three years

Those looking to get a foot on the housing ladder have never had it so good, as both the number of first time buyer products available is on the up, and mortgage rates are at their lowest levels in three years, according to the latest MoneySuperMarket analysis.

The comparison website reveals the number of overall mortgage products available to first time buyers is currently 2,776. Thanks, in part, to the Government’s Help to Buy scheme, this figure is double the number of products available in April 2012 when there were only 1,324 first time buyer products on the market. In addition, the average rate on first time buyer mortgages has dropped by one percentage point in the last three years to 3.26 per cent.

With the average loan to value (LTV) required for first time buyers remaining flat over the last three years (79 per cent compared to 78 per cent in April 2012) , those looking to get their first foot on the ladder would need to stump up a hefty deposit of £31,500 on a £150,000 property. However, a five per cent deposit on the same property would cost £7,500 and for those in that situation there is good news. The number of 95 per cent LTV mortgages available has increased significantly over the last three years. Spurred by a the number of Help to Buy products available, there’s 170 mortgage deals currently on the market available to those with just a five per cent deposit, an increase of 448 per cent since 2012 when only 31 products available. In addition, average rates have decreased by 1.04 percentage points to 4.72 per cent on average.

Kevin Mountford, head of banking at MoneySuperMarket commented: “The increase in the number of first time buyer mortgages, and the corresponding fall in interest rates, can only mean good news for those looking to get a foot on the ladder. Even better, borrowers who can scrape together a 10 or even 15 per cent deposit will find they are able to get their hands on more competitive deals. The introduction of the Government’s Help to Buy ISA which will see the Government provide up to £3,000 towards a first time buyer’s deposit, could also help prospective homeowners get themselves into a new LTV bracket, thus helping them secure a more competitive deal.

“For anyone looking to buy their first home, it’s important not to be led by interest rates alone when comparing mortgages. Expensive fees can wipe out the potential benefit of a lower rate so it’s worth doing the sums first to ensure you really are getting a great deal. Whilst mortgage approvals were up seven per cent overall on March, this doesn’t mean that lenders’ criteria is becoming more relaxed. After the introduction of the Mortgage Market Review, borrowers not only need to have a strong credit score, they also need to prove that they can afford the mortgage they’re applying for – not only at its current rate but, if rates should rise in the future”

“Finally, also think about whether you want a fixed or variable rate deal. Fixed provides security that your rate won’t change during the term of the deal. Whilst variable rates tend to be cheaper, you need to ensure that you will be able to afford your monthly repayments if and when interest rates do rise.”