First-time buyers offered little incentive

"Prior to the credit crunch, the difference in the average rate on fixed-rate mortgages for those with a 5% deposit and a 35% deposit was just 0.30%. Today the gap is 2.18%.


"The risk of customers buying a property and falling straight into negative equity is much higher than a year and a half ago. Even as much as a year ago, asking a first-time buyer to commit to a 40% deposit was virtually unheard of. Now it’s more the norm.

"Even if you have found a property at a bargain price, if you don’t have at least a 25% deposit, you will be paying a heavy premium and for many it is just not a price they are prepared to pay. On a £225,000 property, that equates to a deposit of £56,250 and, for the average person this will take some time to save, particularly at the moment with savings rates so low.

"Prior to the credit crunch, competition was the driving force behind the best buy rates on offer, which were largely for those with a 5% deposit. If lenders want to bring new money in via first-time buyers, they need to offer deals at competitive rates for those with a smaller deposit.

"Northern Rock is expected to re-enter the 90% LTV arena in the near future, so, let’s hope the nationalised lender sets an example to the rest of the market, offering rates to encourage lending at this end of the market once more."

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