Boost for first-time buyers as mortgage rates with 5% deposit hit record low
The average two-year fix at 95 per cent loan-to-value fell to 3.22 per cent in November from 3.33 in October
FIRST-TIME buyers will be pleased to hear that the interest rate on mortgages requiring just a 5 per cent deposit has fallen to record lows.
According to the latest data from the Bank of England, the average two-year fix at 95 per cent loan-to-value (LTV) fell to 3.22 per cent in November from 3.33 per cent in October.
While the average five-year fix at 95 per cent LTV has dropped to 3.79 per cent from 3.89 per cent.
In comparison, just a year ago a two-year fix would have cost 3.97 per cent on average, while a five year fix would have cost 4.58 per cent.
Go back to the start of the Bank of England's records, and a two-year fix would have cost 7.99 per cent in December 1995.
While a five-year fix would have stood at 9.48 per cent in January 1995.
The fall in rates comes despite the rising Bank of England base rate, which mortgage rates are typically based on.
Base rate rose for the first time in over a decade in November 2017 from 0.25 per cent to 0.5 per cent.
It then rose again to 0.75 per cent this August.
Darren Cook, finance expert at comparison website Moneyfacts said: “The higher LTV market looks to be showing healthy competition between providers as they vie for first-time buyers' attention
“Prospective first-time buyers should start to consider their options and make a comparison of mortgage products that may best suit their requirements, as choosing a good deal could save significant sums in the long run.”
But Mr Cook added that it's not just falling rates that have given a boost to first-time buyers, but also the number of mortgages available - although this figure has fallen from its record high in August.
He said: “The number of fixed mortgage deals available at max 95 per cent LTV stands at 304 this month, four products less than the record of 308 available in August this year."
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa - It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan - The Government will lend you up to 20 per cent of the home's value - or 40 per cent in London - after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa - This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the website.
More on first-time buyers
Here are the most affordable cities in the UK for first-time buyers - where it takes only seven months to save a deposit.
Plus, the £120,000 homes that single first-time buyers can afford to purchase on their own and without a deposit.
Meanwhile, we speak to first-time buyers who bought their £270,000 three-bed home 85 miles from their dream location to get on the housing ladder.
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