First time buyers get helping hand as lenders borrow without deposits

The number of fixed mortgage products available to buyers without deposits has doubled in the past 12 months, according to MoneyExpert.com. The independent financial comparison website predicts even more 100% mortgages will be available in the future as lenders react to the mortgage affordability crisis.

The MoneyExpert.com analysis shows in May 2006 only 60 fixed mortgages from 17 providers were available to customers who hadn’t saved any money for a deposit. Now a further ten providers have entered the market and the number of products available has increased to 127 – a rise of 112 per cent.

And would-be homeowners without deposits can still get competitive deals, with the average initial rate payable on 100%+ loan-to-value (LTV) mortgages a reasonable 6.49%. In May last year, it was 5.89%, although the Bank of England base rate has since risen by a full percentage point.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “Our research shows that around 2,500 mortgage applications are being turned down by banks every day as Bank of England interest rate rises hit home.

“Often it’s the youngest applicants who are worst affected by high interest rates as getting onto the property ladder becomes more difficult.

“Affordability is the buzz word at the moment as lenders look to find new ways to bring first-time buyers into the property market. Offering 100 per cent mortgages is another example of this, as saving for a deposit on even the average property can take years.”

The MoneyExpert.com figures reveal that there are now more products available with 100%+ LTV than there are for 75% LTV or less. However saving for a deposit or using equity already tied up in your property is still cheaper for a house purchase in the long run. Average fixed rates on mortgages with a 25 per cent deposit or more are just 5.83 per cent, with deals below 5 per cent still a possibility.