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First-time buyer mortgages at eight-year high

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Written by: Christina Hoghton
25/02/2016
Those looking to buy their first home with a small deposit will find a wide range of deals at record low rates.

First-time buyer deals are edging towards pre-crash levels, having risen to their highest level since April 2008, according to Moneyfacts.

The financial information provider said that product availability for those with 5% or 10% deposits became ‘woefully limited’ in the aftermath of the economic downturn, but first-time buyer deals have now returned in a big way.

Five years ago there were 239 90% or 95% loan-to-value mortgages, but the market has exploded with 845 low deposit deals on offer today.

Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “In recent years borrowers with smaller deposits have been able to benefit from schemes designed to boost what is often considered to be the lifeblood of the housing market. The most effective has been the Help to Buy Mortgage Guarantee Scheme, which has made lending to small deposit holders socially acceptable again.

“The increase in the number of deals means that lenders aren’t just pedalling standard products, either, but are instead offering an array of incentive packages and fees, allowing borrowers to tailor their mortgage to their needs. This is a fantastic development for first-time buyers (FTBs) who had previously struggled to find an eligible deal let alone an attractive mortgage package.”

Rates down

Not only are there more deals, but this competition in the overall mortgage market has seen rates plummet to record lows, including in the 90% and 95% LTV sectors.

For example, the average two-year fixed rate at 90% LTV has fallen from 4.27% two years ago to just 2.99% today – the first time the average has ever dipped below 3%.

The average two-year fixed rate at 95% LTV has also dramatically fallen, dropping from 5.22% to 4.17% over the same period.

Nelson added: “All in all, these all-time low rates and the expanded product choice at high LTVs mean that things have certainly started to look up for small deposit holders. However, more choice can lead to more confusion, so it’s vitally important for borrowers to look at the whole mortgage package and take financial advice where necessary before making a firm decision.”

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