Lower Costs for First Time Buyers

by Mark Johnston

First time buyers who are looking to purchase their first home have faced an uphill struggle in recent months. Strict lending criteria together with banks and building societies looking for much larger deposits has made it difficult for first time buyers to get a foot in the UK housing market.

Although these are still very real issues facing first time buyers, there is some good news amongst all the doom and gloom. Those looking to purchase a property in the UK for the first time can take advantage of some of the lowest mortgage rates in the last twelve years.

According to a report published by the Halifax which looks at first time buyers, the cost of a mortgage this year was around 27% of the average persons disposable income. This is the lowest level since the end of 1998. Back in 2007, the average UK first time buyer shelled out around 60% of their monthly income.

The drop is largely attributed to the falling house prices and the usually low Bank of England base rate which has been at 0.5% for over 18 months.

A spokesperson at the Halifax said: “The substantial rise in house prices over much of the decade prevented many potential first time buyers from entering the market, however, affordability has improved significantly over the past three years.”

A report published by the Royal Institute of Chartered Surveyors suggested that the cost of buying a home will drop further during 2011. A number of experts have suggested that a drop of 2.5% is to be expected during next year whilst others suggested drops of up to ten percent.

David Newnes another property expert suggested: “Buyers remain tentative about the impact of government spending cuts and the prospect of unemployment in 2011,” adding: “There are simply too many properties [entering] the market struggling to find buyers.”

Top of the first time buyer mortgages is Norwich and Peterborough building society. Their two year discount mortgage is just 2.95% and only requires a 15% deposit. With a £995 fee, the overall cost for comparison is 4.4% APR.

The Principality building society also has a great deal offering a 3.59% tracker with an APR of 5%. The two year deal as a £999 fee and a 85% loan to value so the deposit on a £100,000 property would be £15,000.

Borrowers with a smaller deposit of around 10% could look at Loughborough building societies three year mortgage which is 3.99%. he loan to value is a much more manageable 90% and so is the fee of £199. Cost for comparison is 5% APR.

Luckier first time buyers who have managed to save a substantial deposit could take advantage of First Directs 1.99% two year tracker. The fee is £999 but with such a fabulous rate the cost for comparison is an amazing 3.5%.

Natwest are also topping the tracker tables for borrowers with upwards of 40% deposits. They have a two year tracker at 2.19% but the average property purchase of £150,000 would require a massive £60,000 deposit.

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