Lenders take aim at first-time buyers

Lenders are aggressively targeting first-time buyers with a flurry of new 95pc mortgage deals.

The number of available mortgage deals where only a 5pc deposit is needed is up 14pc year-on-year, to 287 in June, according to Moneyfacts, the financial data service. In June 2009 there were only six such deals available to borrowers.

The proportion of successful mortgage applications made by first-time buyers is also rising quickly.

More than two-thirds (67pc) of applications made via brokers went on to complete during the first three months of this year. This compares with 48pc in the same period last year.

The data, published by Imla, the broker trade body, shows the surge in first-time buyers is propping up the market.

This week AA Mortgages, a division of the breakdown company, became the latest lender to launch a new range of two and five-year fixed mortgages for 5pc and 10pc deposits.

Someone with a 5pc deposit would pay 3.82pc for a two-year fixed rate with no fee and £400 cashback. Last month Yorkshire Building Society cut the rates on its deals for those with small deposits. The mutual lender’s two-year fix costs 3.25pc and is available for a 5pc deposit. After the two-year period ends borrowers will go on to the lender’s “standard variable rate” of 4.74pc.

Lenders are keen to snap up people with small deposits as they can charge far higher rates of interest on loans. For instance, Yorkshire will charge borrowers with a 40pc deposit as little as 0.99pc for a two-year fixed deal.

Peter Williams of Imla said the rise in inquiries and completions “shows that a significant number of first-time buyers are still both willing and able to get a foot on the property ladder”.