Which lenders offer the lowest prices?

Mortgage banks are offering lower than average mortgage prices for first-time buyers, according to new research from Moneyfacts.co.uk.

Innovative schemes such as Skipton Building Society’s Deposit Free Track Record Mortgage and the Yorkshire Building Society’s £5,000 deposit deal means the mutuals are breaking new ground for those getting onto the property ladder.

But Moneyfacts said that when comparing mortgages, first-time buyers would be priced on average lower than market averages for 90% and 95% loan-to-value fixed rate products. These are deals that require a deposit of 10% and 5% respectively and are therefore likely aimed at first-time buyers.

For example, a starter who has a 10% down payment will need a mortgage for 90%. loan-to-value (LTV). If they opted for a two-year fixed rate with a 90% LTV, the typical rate available across the mortgage market would be 6.20%.

However, construction savings funds average 5.76% for the same deals.

How does this compare to the big banks?

The lowest fixed rates tend to come from the big banks – Barclays, Halifax, HSBC, Lloyds Bank, NatWest, RBS and Santander.

Data from Moneyfacts showed that on average they were priced lower than mutuals.

Rachel Springall, financial expert at Moneyfactscompare.co.uk, explained that these banks traditionally had more margin to price their mortgages lower.

But she added: ‘The lowest interest rate deal may not be the best choice if all the fees and incentives associated with the mortgage are included.

“Saving money on the initial costs of a mortgage is incredibly important for first-time buyers who may have used up all their money on a down payment, legal fees and moving costs.”

But even with these lower prices, first-time buyers still struggle with affordability, something the building societies recently highlighted in a A major report shows that buying a first home is more expensive than it has been in seventy years.

Mortgage deals for starters

And this is where looking for specific deals aimed at first-time buyers can be very useful.

Springall said: “Mutuals have made several efforts to be innovative, such as Skipton Building Society’s Track Record mortgage, the £5,000 deposit mortgage from Yorkshire Building Society and the partnership between Leeds Building Society and Experian to potentially help consumers improve their credit scores.

“Even with such innovations, a recent study by Coventry Building Society for Intermediaries found that ‘regional differences are a barrier’ for those looking to get onto the property ladder for the first time.

“Any borrower looking to get a foot on the property ladder would be wise to seek independent advice to ensure they find the right deal for them.”