Buyers with a small deposit pay £300 more every month

January 19, 2017 by Brendan O'Neill

Rates

According to research conducted by Moneyfacts and AmTrust, buyers who have a 5% deposit pay £300 a month more than those who have 25% of the property’s value as a deposit.

Data released by the Council of Mortgage Lenders suggests that the average price of a home is now £157,557. If a borrower is able to put down a 25% deposit, the buyer would only require a mortgage for £118,168, at a rate of around 1.42%. A borrower who has only saved 5% of the property value, will need a mortgage of £149,679, which would attract a higher interest rate of 3.66%.

The extra amount payable each month, due to borrowing more and not securing as low an interest rate, is £294. The research also discovered that the number of mortgage products for those with a large deposit are increasing, while those deals aimed at buyers with a small deposit are dwindling.

Experts say that this is because people with a larger deposit are less of a risk than those with a small deposit. Higher mortgage rates are more likely to impact on first time buyers, as they may not have as substantial a deposit as existing homeowners who have built up a decent amount of equity. However, although the government’s Help to Buy scheme no longer exists, there are now more products being offered to people with a low deposit.

Mortgage advisers are required to undertake CeMAP courses so that they have knowledge and understanding of those lenders who have the most competitive deals for those with a small deposit.