Stick or twist - The first time buyer gamble

In October 2007, figures released by the Halifax showed the average house price stood at £200,168 compared to £173,350 today. By investing their deposit money until the housing market bottoms out, first time buyers may not only be able to buy the same property at a cheaper price, but could also be eligible for a mortgage in a lower loan to value band as well.

In October 2007 borrowers could have got an 80% loan to value, two-year fixed deal from Leeds BS at a rate of 5.64%, with a £999 fee. The true cost over two years would have been £24,902.

If they had left their savings intact, the same borrower might now need only a 75% deal, meaning they could get a two year fixed product from Market Harborough BS at 5.49%, with a £595 fee, costing £19,905. Therefore, just by waiting twelve months, first time buyers could have saved nearly £5,000 on their mortgage repayments.

Were house prices to fall at the same rate over the next year as over the last twelve months, then borrowers could fall into an even lower LTV band, perhaps down to 70%, and find themselves making an even bigger saving.

Alan Harper, Head of Mortgages at Moneyfacts.co.uk, commented: "For first time buyers, falling house prices are a godsend, as up until now many have been priced out of the market. By requiring a lower LTV product, you can get a much more competitive deal. Lenders are pricing for risk, so the smaller proportion of your property value for which you have to borrow, the lower the risk to the lender and the better the mortgage deal available.

"Unfortunately we can't predict the future, so first time buyers are taking a gamble if they choose to wait. It could be that market conditions mean rates are at a much higher level next year and borrowers could then find themselves in a worse position.

"The trick, of course, is to get the timing just right, but the current volatile state of the market has merely added to the gamble of knowing when to take the plunge and buy your first property. Get the timing just right, and there is the possibility of big savings to be made."