by Mark Johnston
Christmas may have come a little early for first time buyers in the Uk looking to purchase their first home this winter. According to a leading financial product comparison website there has been a massive 22% increase in the number of products available.
The 22% increase since the start of the year has seen mortgage products with a loan to value of 80% or more steadily climb since January 2010. Mortgages with a 80% or more loan to value ratio (LTV) are seen as first time buyer mortgages as they don’t require a large deposit when compared to other deals.
As well as the number of 80% loan to value (LTV) mortgages increasing, the rates of interest have also fallen on 80/90% loan to value home loans. The average rate has been falling for both 85 and 90% mortgages throughout 2010. At the start of the year a first time buyer looking to borrow £150,000 on a 80% loan to value mortgage would repay £965 which has now dropped to £879 this month. That’s an amazing 9% reduction in as many months. The same cannot be said for mortgages requiring very small deposits. Mortgages with a loan to value of 95% have increased in price, although this makes little difference as they are pretty rare to find without having some sort of third party security to go against the purchase of a new property.
A spokesperson for a leading price comparison website Claire Francis said: “First time buyers are integral to keeping the housing market moving – if there aren’t enough people jumping on at the bottom the market will eventually grind to a halt. A shortage of first time buyers is evident around the country with many people struggling to sell their properties.”
She went on to say: “Unless more lenders start offering 90 per cent mortgages at affordable rates, it is difficult to see how this will be resolved. Increased competition would also help to push rates down, bringing the cost of mortgages available at high LTVs closer to the market-leading deals.”
Miss Francis then confirmed that: “Despite Base Rate having been left on hold at 0.5 per cent again this month, an increasing number of economists believe interest rates will start rising sooner rather than later. Anyone thinking of buying for the first time may therefore be better off acting sooner rather than later as mortgages rates are likely to go up too.
The housing market is also fairly subdued at the moment as the build up to Christmas starts, so it could be a good time to buy as sellers may be more than willing to negotiate on price.”
Norwich and Peterborough are topping the tables at the moment for first time buyers. They have a three year fixed rate mortgage at 3.94%. The loan to value is 85% so a deposit of 15% is required putting it into the first time buyer category. The loan has a £995 fee and cost for comparison is 5.1% APR.
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