First-time buyers are continuing to feel the heat of the credit crunch, with lenders offering little in the way of competitive mortgage deals. Despite the Bank of England base rate dropping to its lowest level, lenders are reluctant to pass on the cuts to first-time buyers, who are deemed to pose a higher risk of defaulting on payments.
Fixed-rate mortgages are being set at as high as seven times the base rate – currently at 1 per cent – with variable-rate mortgages at around 3 per cent above base rate, according to the financial information service Moneyfacts. "First-time buyers are meant to be the lifeblood of the property market, but with the average rate as high as 7.02 per cent, there is little incentive for them to step on to the first rung of the ladder," said Michelle Slade, an analyst at Moneyfacts.
Anyone looking for their first house may also see the shine taken off lower prices by having to cough up a heftier deposit. "Even if you have found a property at a bargain price, if you don't have at least a 25 per cent deposit, you will be paying a heavy premium," Ms Slade said. "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."