For first time buyers, the cost of a mortgage is over £2,000 more per year than for those able to deposit 40 percent or more according to mform, as there are mortgages available for those with a 40 percent deposit as low as 3.99 percent and yet for those with just a 20 percent deposit the interest rate will jump to 5.99 percent or more.

Francis Ghiloni, at mform, said:

“The mortgage market is entirely back to normal as long as you have a deposit of 40 per cent which is okay for some remortgagers – but of course that is a long way from normal and doesn’t help the housing market as by definition to move up to larger properties families need to stretch their borrowing.

“It is encouraging that there are good deals out there but disappointing that the choice is reduced for those with smaller deposits who will typically be first-time buyers or those who have bought in recent years and have not seen a significant rise in their homes value.  The differences in true cost for the same loan are simply staggering – an extra £2,200 a year is a substantial slice out of anyone’s budget and that price differential will continue to act as a drag on the market.”

However, it has always been the case that where there is a lower risk for the mortgage lender, or indeed in any financial lending scenario, then there is more competition for that business and hence lower prices.  Although first time buyers have been lucky in recent years with the mad rush to buy property and rising house prices, the current property market issues are really a correction that was bound to happen as prices could not continue to rise at the rate they have in a sustainable manner.

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