First time buyers have had a pretty tough time of it over the last few months with more lenders pulling away from the high loan to value deals and concentrating on mortgages with higher deposits, for example in the 25% deposit range.
There are still lenders operating in the market that will offer mortgages with minimal deposits from 5% although the rates being offered at this level do reflect the deposit size and it’s a very simple rule in the mortgage market, the bigger the deposit the more competitive the interest rate.
What will a 5% deposit get you?
Currently there is only one lender showing available to us at 5% and that is Aldemore Bank PLC (Source Mortgage Brain 21/02/2012). We have seen other lender recently in this category such as the Skipton building society but they have recently pulled back to first time buyers requiring a 15% deposit. It is worth noting that trying to achieve a 10% deposit will firstly offer a greater choice of mortgage lenders and secondly the deals on offer will be much more competitive.
If the only way of increasing your deposit from 5% to 10% is by borrowing from family members I would recommend this as most lenders will accept a ‘gift’ from a family member for a first time buyer. I do expect more lenders to flit in and out of the 95% mortgage market although I don’t expect huge competition in this segment of lending. For this reason it is always worth checking with a broker to see what is available.
What will a 10% deposit get you?
A 10% deposit for a first time buyer will currently give you a choice of 10 mortgage lenders (Source Mortgage Brain 21/02/2012) with a range of 39 different mortgage schemes including fixed rates, tracker rates, offset mortgages, professional rates, shared ownership deals and exclusive deals to clients who bank with certain institutions such as the Woolwich.
All deals for first time buyers at the 90% level will have to be on a repayment mortgage and your age will define the mortgage term available to you. On experience most first time buyers opt for a mortgage term of between 25 – 35 years due to affordability – The longer the mortgage term the cheaper the monthly mortgage cost making the jump onto the property ladder a worthy consideration when compared against renting.
Interest rates with a 10% deposit can be as much as 1.5% lower than that of a 95% deal (depending on the deal chosen) and hence why our recommendation would always be to maximize the deposit you put down when applying for your first mortgage.
Have you got a deposit larger than 10%?
If you are in this category then for every 5% deposit over and above the 10% level you can put down the choice of lenders and the rates on offer will be much more attractive. To provide an example of this a 14% deposit will not get you any better deals than a 10% deposit – you would have to get to the 15% level for the deals to start changing for your benefit.
If you would like an idea of the types of deals available to you as a first time buyer please do not hesitate to contact us for a free and no obligation discussion and quote.
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