The first-time buyer market is in a rude health despite the closure of the Help to Buy mortgage guarantee scheme, latest figures show.
Research from Moneyfacts.co.uk revealed the number of deals available to buyers with a five per cent deposit has soared from 59 in February 2012 to 276 in February 2017.
First-time buyers have also benefited from a significant reduction in mortgage costs.
Two- and five-year fixed rates for those with a five per cent deposit have fallen from 5.93 per cent and 5.89 per cent to 3.92 per cent and 4.43 per cent respectively over the last five years.
The fall equates to a difference of £7,715.40 in terms of repayments during the first five years of the mortgage, based on the average five-year fixed rate.
Launched in October 2013, the government's Help to Buy mortgage guarantee helped home buyers with good credit records but who had a deposit as low as 5 per cent.
The guarantee offered lenders an ‘indemnity’ or insurance cover, compensating them for most of any loss they may suffer if the borrower defaults, the property is repossessed and there is insufficient equity in the property to fully repay the lender.
It was closed on 31 December 2016.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The first-time buyer mortgage market has gone from strength to strength over the years boosted by government support.
“In previous years, there had been a lack of competition for those considered more risky, due to the small amount they could put down as a deposit.
“Prospective buyers today have so many more cost-effective mortgage options available, potentially making their dream of owning their first home much more achievable.”
Yet despite these positive figures, Ms Springall urged caution due to "significant disadvantages" in the current housing market.
She added: “House prices are continuing to rise, so prospective buyers may well be struggling to amass a large enough deposit, particularly if a large portion of their income goes to rent.
“With this in mind, borrowers would be wise to be stringent with their daily finances, be on the lookout for the best mortgage deals and seek independent financial advice before entering into any arrangement.”
simon.allin@ft.com
