First-time buyer rates at three year low

Typical first-time buyer mortgage rates now stand at 3.26%, while in the past three years the number of 95% LTV products on the market has risen by 448% to 170.

Thanks to the government’s Help to Buy scheme the number of products designed for first-time buyers has risen to 2,776 from 1,324 in April 2012.

Kevin Mountford, head of banking, MoneySuperMarket, said: “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% 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.”

The average loan to value for first-time buyers is 79%, meaning those wanting to get foot on the housing ladder would need to stump up a hefty deposit of £31,500 on a £150,000 property. However, a 5% deposit on the same property would cost £7,500.

Mountford added: “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 7% 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.”

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