Cost of first-time buyer mortgage deals hits record low
Strong competition between banks has been pushing down the cost of mortgage rates for years. Now, the battle has extended to low-deposit loans with a leading lender becoming the first to offer a deal at below 2% aimed at first-time buyers.
Experts have welcomed the decision by Yorkshire Building Society to launch a competitive first-time buyer product.
Lowest first-time buyer fixed rate since records began in the 1980s
First-time buyers looking for a low-cost mortgage deal have been boosted by the lowest short-term deal ever offered to borrowers with a small deposit. The Yorkshire Building Society has launched a mortgage at 90% loan-to-value at a fixed rate of just 1.98%. Borrowers with a 10% deposit can take advantage of the two-year deal, which has a product fee of £1,345.
Financial analysts Moneyfacts say that this is the lowest rate for this type of deal since their records began in 1988.
The society is also offering a new five-year fixed-rate mortgage for borrowers with a 10% deposit, with a fixed rate at 2.93% and a £1,345 product fee.
The Yorkshire deal comes in the same week as a High Street bank launched the first sub-1% fixed rate deal in 28 years. The HSBC deal at 0.99% is also fixed for two years, although it requires a deposit of 35% and comes with a £1,499 product fee.
Many lenders have been offering their lowest mortgage rates ever in recent years, as the Bank of England base rate remains at its record low of 0.5%. Rachel Springall, a finance expert at Moneyfacts, said: "It's fantastic to see Yorkshire Building Society support first-time buyers by offering a competitively priced deal for those with a 10% deposit. It can be a great hardship trying to get on to the property ladder so finding a cost-effective deal to reduce monthly mortgage payments is essential.
"Borrowers must always work out the true cost on their mortgage deal and raise enough cash to cover all their upfront fees, such as legal costs or a product fee. In this low-rate market buyers should ideally be aiming to overpay on their mortgage whenever possible so that they can raise the equity in their home and reduce the term of the loan."