Mortgage boost for the first-time buyers

There are 183 different products aimed at people taking their first step on to the property ladder, up from 62 in June 2009, according to financial information group Moneyfacts.co.uk.

First-time buyers have been hit hard by the credit crunch as lenders have become more risk-averse and pulled deals that required little or no deposit.

But there are signs that banks and building societies are tentatively re-entering the market for people with only a small amount to put down, and there are now 31 different loans available for people with a 5 per cent deposit.

This is the highest level since December 2008, and well up on the six deals available in June 2009, although it remains a far cry from the choice of 1,079 products that people borrowing 95 per cent of their home’s value had in July 2007, before the credit crunch struck.

The recent increase in competition in the first-time buyer market has also led to a slight reduction in the rates that people buying their first home are charged.

The average interest rate charged on a first-time buyer mortgage is 5.22 per cent, compared with 5.63 per cent in June 2009.

The reduction in rates charged to first-time buyers is in line with trends in the wider mortgage market, which have seen the cost of fixed rate loans fall in recent weeks as the threat of an imminent rise in interest rates recedes.

Louise Holmes, spokeswoman for Moneyfacts, said: “Higher loan-to-value mortgages have made a return to the market over recent months, suggesting lenders are taking positive steps to help the first-time buyer market.

“These positive figures should offer some hope to those who dream of owning their own home.”

But although lenders have increased the number of first-time buyer mortgages on offer, it remains to be seen if this will translate into higher levels of advances for people buying their first home.

Figures from the Council of Mortgage Lenders show that in March, the latest month for which data is available, first-time buyers were still putting down average deposits of 21 per cent.

There were only 14,600 mortgages advanced to first-time buyers, well down on levels of more than 30,000 a month seen in 2006 and early 2007.