Despite last week’s drop in interest rates, which many lenders have passed on in their variable rates for mortgage offers, and the increasing drop in property prices, many first time buyers are still finding it difficult to get on the property ladder. The reason for this is that most mortgage deals available to borrowers require a sizable deposit.

Figures released by Moneyfacts recently showed that on thirty-five mortgage deals available required a 5% purchase price deposit, and just sixty-six mortgage deals were available with a 10% deposit. The means that first time buyers are having to scrimp and save in order to be able to afford a property, even at the lower end of the pricing scale.

Last year there were 1,126 mortgage deals available with deposits of 5% and over.

The Council of Mortgage Lenders says that first time buyers are being discriminated against because lenders see them as being a high risk of going into arrears, and many first time buyers are having to borrow additional funds from parents in order to secure a mortgage deal.

Borrowers with high deposits however have more options open to them now than a year ago, as there are 228 mortgage deals available to borrowers with a 15% deposit, whereas there were only 198 available last year.

With interest rates expected to fall again next year, borrowers are keen to take advantage of the situation and take out tracker mortgages where possible, however many of the tracker mortgage deals are only available with very deposits, 25% and above.

HSBC is currently offering a tracker deal at 0.99% above the base rate, so long as the borrower has a 40% deposit. This is out of the reach of most first time buyers.

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