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First-time buyers properties

First-time buyers: Now you need a 25% deposit

Monday 24 November 2008

By Becca Talbot becca.talbot@consumerchoices.co.uk

First-time buyers with deposits of less than 25% are struggling to find attractive tracker mortgage deals.

First-time buyers are finding it increasingly difficult to obtain an affordable mortgage despite the 1.5% Bank of England base rate cut on November 6.

Major lenders including Halifax (www.halifax.co.uk), Abbey (www.abbey.com) and Alliance & Leicester (www.alliance-leicester.co.uk) have introduced new tracker mortgages with a maximum loan-to-value (LTV) ratio of 75%.

HSBC (www.hsbc.com) currently offers the best value tracker, at just 0.99% above the base rate, making it currently 3.99%. However, worryingly for first-time buyers it is only available to customers with a 40% deposit.

Other lenders, such as Abbey, have also been adding to first-time buyers’ worries by increasing the rates on fixed-rate products for borrowers with who only have a 10% deposit.

Michelle Slade of financial website Moneyfacts.co.uk (www.moneyfacts.co.uk) advises first-time buyers looking to get onto the property ladder to get serious about saving.

“You’ll need to save as big a deposit as possible. To get the best deals at the moment you’ll need a 25% deposit,” she said. “There are still deals available for just a 5% deposit, but these are dwindling fast.”

Moneyfacts.co.uk data shows that the number of mortgages on the market available for people with just a 5% deposit has fallen by over 30% over the last twelve months. The number of lenders offering deals with a 25% deposit has more than doubled.

Slade says: “If you are in a position to get a mortgage, then you need to make sure you shop around, a broker will help you decipher the market, but you should also do your own research, as some of the best deals are only available directly from lenders.”

Chris Eagle, commercial manager at CreditChoices.co.uk said: “Things are getting tougher for first-time buyers. A large deposit is now vital in order to find the best deal in the market, so if you’re thinking about mortgages, it really is a good idea to start saving now.”

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