Money Insider: It's tough for first-timers but there is hope

Despite enduring some of the toughest economic conditions witnessed in the UK over the past five years, first-time buyers (FTB) have far from given up on buying their own home, according to a report this week.

In fact the findings from Yorkshire Building Society reveal that the first-time buyers of today are more financially focused than those who bought before the credit crunch and are looking towards bricks and mortar to provide them with some financial certainty.

Back in 2006, when the mortgage market was booming, there were 408,000 mortgages taken out by first-time buyers, accounting for 36 per cent of all transactions. Five years on, that number (for 2011) was far lower at just 193,000; however, this accounted for 38 per cent of the market, so there's still a strong appetite, and a determination to get that first foothold on the property ladder.

The good news for potential homeowners is that many more mortgages are now available at 85 per cent and 90 per cent loan-to-value compared with just three years ago. It feels like a long time since most lenders were insisting on deposits of between 25 per cent and 40 per cent. However despite the improvement in product choice, 56 per cent of people say their biggest challenge is raising a large enough deposit.

According to data from the Council of Mortgage Lenders the average cost of a first home is £130,000. A 10 per cent stake means saving £13,000, and 15 per cent works out at £19,500 on a £130,000 home, something that may seem within reach if you're still living with your parents, but if you're living in rented property, the ability to save a decent sum each month on top of what you pay the landlord is just not achievable for many.

For those who are able to save a deposit, the ongoing mortgage costs have fallen sharply compared with this time in 2009. Back then a £110,000 best buy five-year fixed rate mortgage if you had a 15 per cent deposit would have been 5.75 per cent, with a £1,000 product fee, resulting in monthly repayments of £692. Today, Co-operative Bank is offering the same five-year 85 per cent LTV fixed rate deal at just 3.99 per cent and no fee. The vastly improved rate means your monthly repayments (assuming you opt for a 25-year term) come to £580 per month, and over the five-year term you'll pay out £7,700 less than the best deal just three years ago.

There are some tentative signs that the UK economy is starting to improve, and although it's early days, an improved outlook for growth and jobs will give more people the confidence to purchase a home of their own.

Affordability is no longer the issue for most first-time buyers, but raising a big enough deposit is still a massive issue. These latest findings reveal that one in five potential new buyers feel defeated before they start.

New customer surge at Co-operative Bank

The past week was National Ethical Investment Week, and there has been no shortage of stories highlighting how opting for a provider with an ethical pedigree is becoming increasingly popular.

One of the statistics that highlighted this trend came from the Co-operative Bank, which announced that it had signed up more than 100,000 new customers this summer with accounts transferred from banking rivals up a massive 43 per cent on last year.

It is the only major high-street bank to have a clear ethical policy which gives customers a say in how their money is used. And 2012 marks the 20th anniversary of the launch of the policy.

Robin Taylor, head of banking at the Co-operative Bank, said: "Feedback from customers that have recently switched has shown that the instigator for them was a desire to have a bank they could trust, underpinned by a responsible approach to banking and an ethical policy that directs who the bank will and will not finance."

Without shareholder demands, the member-owned Co-operative Bank is renowned for its high levels of customer satisfaction and range of competitively priced products. However, on the back of a number of high-profile banking scandals during 2012, it is the ethical principles that have been a big differentiator for consumers this year.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk