Rates for mortgages with just 5% deposit now ‘lowest on record’
This is good news for first-time buyers who are looking to get on the property ladder
THE rates for mortgages with a five per cent deposit have fallen to their lowest level on record, which is good news for first-time buyers who are looking to get on the property ladder.
In fact, both the average two-year and five-year fixed mortgage rates have fallen, according to .
This is surprising, yet positive, given that the Bank of England raised the base interest rate to 0.75 per cent in August this year, up from 0.5 per cent.
The average two-year fixed mortgage rates have dropped to 3.73 per cent this month, compared to 5.67 per cent in September 2013.
Meanwhile, the average five-year fixed mortgage rates have also fallen to 4.08 per cent, down from 5.38 per cent in September 2013.
At the same time, the number of mortgages available for a five per cent deposit has also boomed - this figure now stands at 345, which is 120 more compared to September 2016.
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“For first-time buyers who often feel they get the short end of the stick, this is fantastic news,” says Moneyfacts' finance expert Charlotte Nelson.
Yet it’s also worth remembering that such mortgages are still some of the most expensive in the market.
If borrowers are able to put down a ten per cent deposit, as opposed to five per cent, they are often better off financially, notes Nelson.
But before you get the funds together for a deposit, there are certain steps you can take to improve your chances of getting the loan for your first home.
How to find the best mortgage
Finding the right mortgage is all about your individual circumstances. Here's some advice on what you should keep in mind:
- Decide what kind of mortgage you want: a fixed deal means you'll know exactly what your mortgage will cost, but if interest rates fall, you won’t see your payments drop. A variable deal means your costs will fluctuate, but only because of economic changes, rather than decisions by the lender.
- Shop around: there are big differences between mortgage deals, so make sure you compare costs. Also check whether there are any cashbacks or other offers. Here websites such as Moneysupermarket and Moneyfacts may come in handy.
- Calculate your total costs: look beyond the headline interest rate and take into account all the fees you have to pay, such as arrangement fees, mortgage valuation fees and insurance fees.
- Consult a mortgage broker: if the flurry of options are confusing, a mortgage broker can help you find a deal that best suits your personal circumstances. Just make sure that you use an independent company or adviser.
Here's more on the best deals around for first-time buyers and whether fee-free mortgages are a good deal.
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