Lowest ever mortgage rates save money for first time buyers

July 26, 2016 by Brendan O'Neill

Rates

First time buyers can save money over the initial two years of owning a property, in comparison with renting, thanks to some of the lowest interest rates for high Loan to Value (LTV) products.

According to AmTrust International, Mortgage and Special Risks, the gap between paying mortgage interest and rent is at its greatest ever level. The organisation also compared the cost of paying a mortgage over two years – in early 2015, interest payments on a mortgage of £130,500 with a 95% LTV, would have cost £11,327 over two years. In early 2016, that amount has dropped to £10,019.

People who have a smaller deposit have been helped onto the housing ladder by Help to Buy schemes. This, together with more competition between lenders, has resulted in lower interest rates for high LTV products. First time buyers can obtain more affordable mortgages, enabling them to repay more of the capital.

However, although lower interest rates make it easier for someone to buy a home, the higher rents make it much more difficult to save for a deposit. The annual cost of renting a property during the last year has increased by 3%, meaning that it will cost 87% more to rent a home than to buy one. When factoring in the cost of interest and capital, it is still cheaper to buy a home than to rent.

First time buyers may find it useful to obtain the advice they require from a mortgage adviser, as they are CeMAP trained and have the relevant knowledge and experience.