With the government’s decision to scrap stamp duty for first-time buyers, and the base rate rise having little impact on mortgage rates with a 95% loan-to-value, this year is looking promising for prospective first-time buyers wanting to get on the property ladder.

Since the base Rate rise, the average two-year fixed rate mortgage with a 95% loan-to-value has fallen 0.12% to 4.09%, and the equivalent average five-year fixed rate has dropped 0.01% to 4.49%. According to Charlotte Nelson from MoneyFacts, borrowers with only a 5% deposit seem to be more highly valued by mortgage lenders at present, and there is increased competition to be seen as the ‘go-to’ lender for first-time buyers.

Nelson also highlights that there is an array of incentive packages and fees available, allowing borrowers to be selective based on their own needs. Currently cashback offers for borrowers with a 5% deposit are an average of £419, which is a welcome bonus for budget constrained first-time buyers.

More savings means more deals

While the 95% loan-to-value mortgage rate drop is a positive one, borrowers that can save a 10% deposit could make more significant savings. Since loan-to-value rates are significantly better at 90%, at an average rate of 2.65% (MoneyFacts), if first-time buyers can save that extra 5% deposit, their monthly savings on mortgage repayments could be as much as £153.22.

There has been criticism of the government’s stamp duty cut, with some voicing concerns that the move will push property prices up, but most reports only forecast a relatively small house price uptick in the UK in the year ahead.

Experts predict that the market will see the entry of more first-time buyers this year, mainly due to interest rates remaining relatively low and fairly slow house price growth. Supported by the stamp duty changes, the extension of the Help to Buy scheme and the availability of more shared ownership schemes, the year ahead looks set to be a positive one for many hopeful first-time homeowners.

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