Homeowners bear brunt of mortgage crisis as first-time buyers get best deals

Remortgaging homeowners are bearing the brunt of higher rates, as banks pass on the cost of cheap first- time buyer mortgages.

Some lenders are offering discounts to first-time buyers of as much as 1.15 percentage points, despite technically being “riskier” customers. Halifax is offering buyers with a 20pc deposit a two- year fixed rate of 4.57pc, while those already with a mortgage face a rate of 5.72pc.

High street lenders are desperate for business and trying to lure new customers. Across the big six lenders, remortgage rates were 0.51 percentage points more expensive on average compared with rates on offer for first-time buyers.

Nationwide is offering first-time buyers with 10pc deposits a rate of 4.79pc for five years, and remortgaging homeowners 5.3pc. Nationwide has slashed this first- time buyer product by 0.13 percentage points, similarly, HSBC is offering a five-year fix to first-time buyers with a rate of 4.48pc, but remortgagers will need to pay 5.09pc. That is a difference of £ 89 a month on a £250,000 loan over 25 years.

Graham Cox, of Self Employed Mortgage Hub, said: “Lenders know they need to get first-time buyers on the ladder. It makes sense.” Banks are facing another year of lower levels of lending as the market contracts. Lending for house purchases in the UK fell 28pc last year, and is set to fall a further 8pc this year, says banking trade body UK Finance.

House prices are also forecast to increase by 3pc this year, according to estate agency Knight Frank, rather than fall or stagnate as initially predicted.

In recent weeks, high street lenders have been rapidly cutting their mortgage prices as they battle it out for business. But Laura Bairstow, of brokerage The Mortgage Masters, said she has noticed “frustrations” among existing homeowners who have seen lenders’ headline rates and then found out they’re not eligible, as they are not first-time buyers. Those at the end of their deal could do a product transfer with the same lender, which can be more competitive, says Lewis Shaw, of Teesside-based brokerage Riverside Mortgages.

But those borrowers hoping to raise capital, consolidate debt, or pay a chunk of their mortgage off to save on interest repayments in the future will still need to remortgage.

Ruby Hinchliffe

Mortgage rate offered by Halifax, to first timers. Customers have to pay 5.72pc