Could you save 16k to buy a home First-time buyers still being frozen out despite mortgages getting cheaper
would have had to pay a total of 20,391 — 936 more over the period.
Five-year fixes for first-timers have also come down in price compared with a year ago.
With Hanley Economic Building Society, you can get a rate of 4.2 per cent, lower than Nottingham BS’s top rate of 4.74 per cent last year; today, this would give you monthly repayments of 808 and a total five-year cost of 48,480.
Yet, despite price falls in many parts of the country, high house prices continue to be a major hurdle for new buyers.
The average UK property costs over 162,000, according to Land Registry figures — nearly 30,000 more than a decade ago.
So to put down a 10 per cent deposit to qualify for the new lower rates, you need to have over 16,200 in savings.
This is a huge sum for most people, even with a financial boost from parents, especially with savings rates at an average of 0.77 per cent.
Andrew Montlake, director of mortgage broker Coreco, says: ‘With property prices still high — especially in London — and the cost of renting failing, it is very tough for prospective borrowers to save what’s needed to get the best deals.’
Despite rates edging down in general, the very best rates continue to be reserved for buyers with big deposits.
Those who can stump up 40 per cent can now get a two-year fixed-rate deal for as little as 1.74 per cent with Chelsea Building Society.
Monthly repayments on a typical 150,000 loan are 617 and total cost across two years, including the 1,675 fee, is 16,483. This is 2,972 cheaper than the Yorkshire BS deal for those with just a 10 per cent deposit.
It’s a similar story with five-year fixes.
With a 40 per cent deposit you can get a 2.59 per cent deal from Yorkshire Building Society with a 1,475 fee. Monthly repayments are 680 and the total five-year cost is 42,275.
This is 6,205 cheaper than the five-year fix for those with 10 per cent equity to put in.
One alternative for those who are struggling to gather a 10 per cent deposit is to opt for a 95 per cent loan-to-value deal.
Here, buyers will need just 5 per cent of the asking price as a deposit.
It means, for an average 162,000 property, finding 8,100 — a much more manageable task.
However, there are still very few of these loans available. Melton Mowbray Building Society has a three-year fix at 5.49 per cent with a 998 fee. Monthly repayments are 920 and total three-year cost 34,118.
Newcastle Building Society also has a three-year fix but it costs more, at 6.19 per cent with a 195 fee and 300 cashback. Monthly repayments are 984 and total cost 35,619.
For many, it may be worth waiting and saving the extra to get a 90 per cent deal. It could save you hundreds of pounds per month on your repayments and thousands of pounds over the course of the deal.
However, with new government schemes such as Help To Buy likely to inflate property prices further, a 90 per cent deal may become even further out of reach for many new buyers.