The average rate on first time buyer mortgages has dropped by one percentage point in the last three years to 3.26 per cent, according to new research.
Data released by comparison website MoneySuperMarket has also revealed that mortgage products available to first time buyers has doubled in the last three years and currently stands at 2,776.
This figure is double the number of products available in April 2012 when there were only 1,324 first time buyer products on the market.
With the average loan to value (LTV) required for first time buyers remaining flat over the last three years (79 per cent compared to 78 per cent in April 2012) , those looking to get their first foot on the ladder would need to stump up a hefty deposit of £31,500 on a £150,000 property.
However, a five per cent deposit on the same property would cost £7,500 and for those in that situation there is good news.
Kevin Mountford, head of banking at MoneySuperMarket, said the increase in the number of first time buyer mortgages and the corresponding fall in interest rates is good news for those trying to get a foot on the ladder.
“Even better, borrowers who can scrape together a 10 or even 15 per cent deposit will find they are able to get their hands on more competitive deals,” he said.
“The introduction of the Government’s Help to Buy ISA which will see the Government provide up to £3,000 towards a first time buyer’s deposit, could also help prospective homeowners get themselves into a new LTV bracket, thus helping them secure a more competitive deal.
“For anyone looking to buy their first home, it’s important not to be led by interest rates alone when comparing mortgages.”
Kevin said that expensive fees can wipe out the potential benefit of a lower rate so it’s worth doing the sums first to ensure you really are getting a great deal.
“Whilst mortgage approvals were up seven per cent overall on March, this doesn’t mean that lenders’ criteria is becoming more relaxed,” he added.
“After the introduction of the Mortgage Market Review, borrowers not only need to have a strong credit score, they also need to prove that they can afford the mortgage they’re applying for – not only at its current rate but, if rates should rise in the future.”