First time home buyer? You’re in luck!

The are many hurdles and yet the first-time buyer mortgage market is in good health, with far more deals on offer than five years ago, according to Moneyfacts, the analytics business.

“In 2012 there were 59 deals available to buyers with a 5 per cent deposit, from just 24 lenders — 75 per cent of which were mutuals,” says Rachel Springall, a finance expert at Moneyfacts. “Today the number of deals has rocketed to 276, with 53 different lenders, including most of the large high street banks.”

Over the same period, the average two-year and five-year fixed rates for those with a 5 per cent deposit fell from 5.93 per cent and 5.89 per cent to 3.98 per cent and 4.43 per cent.

Where to find the best deals

“If we assume the biggest challenge for first-time buyers is that they have smaller deposits, there is actually very good availability at 95 per cent loan-to-value (LTV),” says David Hollingworth, of London & Country Mortgages. Nottingham Building Society has a fixed two-year rate of 2.99 per cent, but, he says, if you can double your deposit, Firstdirect offers 1.89 per cent fixed for the same amount of time. “Stretching to a 10 per cent deposit is worth it if you can manage. It could open up a wider range of deals and lower rates.”

Aaron Strutt of Trinity Financial, the mortgage broker, says that this type of deal “couldn’t be farther away from what it was a few years ago” when most people would have needed a 40 per cent deposit to access these rates. Today borrowers with 40 per cent equity can get a 0.99 per cent rate from Santander, fixed for 18 months.

Borrowers with 40 per cent equity can get a rate as low as 0.99 per cent, fixed for 18 months

Some borrowers might want to take advantage of incentive packages that offer cashback and free valuations, but these should be factored into the overall value of a deal. Barclays has a cashback mortgage offer for first-time buyers intended to help to cover the cost of stamp duty. If you’re buying a property valued between £100,000 and £150,000, you will receive £1,250; if it is valued between £150,000 and £500,000, then you get £2,500. The rate is 2.69 per cent for a five-year fix at 80 per cent LTV. Mr Strutt says those who don’t need the money for stamp duty fees should look at cheaper deals.

If parents are willing to help, but don’t want to hand over money to boost the deposit, there are “quirkier deals” that offer loans of up to 100 per cent, using cash or equity from family members as extra security. Aldermore Bank’s family guarantee mortgage, for example, is for those who have little deposit, but have a parent or grandparent able to provide a guarantee secured against their home.

It’s not all over for Help to Buy

Although the government’s Help to Buy mortgage guarantee scheme ended last year, the Help to Buy equity loan scheme continues until 2021, which means that if you’re buying a new-build home you can borrow a percentage of the price interest-free for the first five years. The government will lend up to 20 per cent on a property outside London, or 40 per cent inside the capital, if you can save a 5 per cent deposit.

The Help to Buy: Shared Ownership scheme is also still available for first-time buyers. It enables individuals or couples earning less than £80,000 — or less than £90,000 in London — to buy a share of a home at 25 to 75 per cent of its value.

The remaining share of the property is owned by a housing association, to which rent is paid, but you then have the option of increasing your ownership later.

Are you currently on a help to buy scheme? Have you found a good deal you’d like to tell us about? Get in touch!

– Bronny

bronwin@askbronny.com