Deposit Secures Best Mortgage Deal

First-time buyers now have access to more mortgage offers than ever but many will have to be prepared to stump up deposits beforehand in order to secure the best deal, new research claims.

The rise in house prices have been accompanied by a greater range of mortgage deals including 100 per cent mortgages, 130 per cent mortgages, the parental guarantor mortgage, the graduate mortgage, and 97 per cent mortgages.

But with annual house price growth slowing to under five per cent, putting down a five per cent deposit can secure the best deal of all, according to moneysupermarket.com.

Louise Cuming, head of mortgages at price comparison website moneysupermarket said: "There are many deals that have been designed for the first-time buyer. But the 95 per cent LTV [loan to value] option still opens up many more opportunities and the products are more competitive in the long run.”

She added: “A number of specific first-time buyer products have higher interest rates when compared with 95 per cent LTV products as they are deemed a lot more risky.

"To this end, lenders will often impose any number of conditions as well as fees such as the higher lending charge.”

Moneysupermarket calculates that over two years with a 95 per cent mortgage, people can save £7,630.96 compared with a 100 per cent mortgage – even when taking the higher lending charge into consideration.

"The saving over two years may be almost the same as the deposit given at the outset, but don’t forget, first-time buyers will have this knocked off the whole loan. They will also get this money back should their house go up in value when it comes to selling," Ms Cuming concluded.

If you are looking to buy a house, get the best mortgage deals by comparing the market here.