Mortgage costs for first time buyers are increasing as lenders believe that property prices are set to fall.
During the last six months, mortgage rates have been cut to record lows by lenders, for borrowers who have larger deposits. According to data released by Moneyfacts, the average mortgage rate for a buyer wanting to borrow 95%, increased from 3.89% to 4.24% in January. Rates for borrowers with a 10% deposit have also risen, from 2.72% to 2.77%. The Bank of England has been informed by lenders that they want to reduce lending to buyers with small deposits during the next three months.
According to UK Finance, lenders are concerned that property prices are rising at less than two thirds the rate they were one year ago. One of the main concerns is that buyers who have a small deposit may face negative equity if the value of their property falls, leaving them trapped and unable to sell their home. One mortgage broker, Andrew Montlake, warns that first time buyers may face more increases to mortgage rates.
For those who have a larger deposit, or existing homeowners, there are plenty of record low deals available, as long as the criteria are fulfilled. However, a first time buyer with a low deposit may have difficulty finding an affordable mortgage, which is where a CeMAP qualified mortgage advisor may be able to help. Saving for a large deposit or maximising the benefits of schemes designed to help those who are struggling to save a deposit, is advisable for first time buyers.
