Bank scheme still not helping first-timers

First-time buyers and those with small deposits have seen barely any benefit of cheaper loan costs from the Bank of England's Funding for Lending scheme so far, according to figures compiled for the Independent.

Banks and building societies have been using the cheap cash on offer to slash rates on mortgage products for less risky borrowers, but those with smaller deposits are largely missing out, according to financial information provider Moneyfacts.

Borrowers with a 5 per cent deposit must still pay 5.84 per cent on average for the typical two-year fixed-rate £150,000 mortgage, just 0.19 per cent cheaper than the 6.03 per cent average rate on offer before the FLS began in August. Those with bigger 40 per cent deposits are gaining savings nearly three times as big as average loan rates for similar deals have been trimmed from 4.47 per cent to 3.93 per cent. The high cost of mortgages – when the Bank's official interest rates are at a record low 0.5 per cent – comes as official census data show the share of households renting jumping from 9 per cent to 15 per cent over the past decade. Home ownership has fallen from 69 per cent to 64 per cent.

There are just four extra deals on the market – bringing the total now to 66 – catering for borrowers with a 5 per cent deposit since August. Tracker rates for those with smaller deposits have also fallen by less than 0.1 percentage points.

A Moneyfacts spokeswoman said: "The introduction of the Funding for Lending scheme has seen the mortgage market heat up, with an increase in mortgage availability in the past few months. Recently several lenders have launched new products with attractive low rates. But it appears that these cuts in rates and loans products are targeted to the already serviced 60 per cent loan-to-value market.

"Although it is good to see an increase in choice in the mortgage market, it does little to reduce the worry of those who require a higher loan-to-value deal."