Headline mortgage rates have fallen dramatically in recent weeks, with deals in the 5-6% region now common place.
In fact, more than half a dozen lenders have announced rate cuts this week alone, some by as much as 0.5%.
However, this doesn’t mean the credit crunch is over and the days of cheap mortgages are set to return
Low equity? High rate
Lenders are still extremely risk averse, yet they obviously want to attract customers.
As a result, they have brought a number of juicy rates to the market but are only offering them to low risk candidates – i.e. those who already own a sizeable chunk of their home and are thus less likely to default.
Take a look at the sub 6% deals on the market today and you will see the majority come with a maximum loan-to-value (LTV) of between 50% and 75%.
FTBs out in the cold
This is obviously bad news for first time buyers (FTBs), who will find it extremely difficult to qualify for the best rates.
Their plight was highlighted by recent research from online mortgage firm mform.co.uk, which found that the average buyer now needs to come up with a whopping £37,119 deposit to get the most competitive mortgage deals.
Amazingly, the figure has nearly doubled since last year, when it was a far more manageable £20, 980.
Pay a premium
Obviously very few FTBs can come up with that kind of money and are forced to settle for the higher LTV, which come with far higher rates, too – often in the region of 6.25% to 7%.
This is why, despite the talk of falling house prices and cheaper mortgages, many FTBs find themselves no nearer to making that first step onto the property ladder.
If you are a prospective FTB desperate to take advantage of the dip in prices, you may want to consider paying a mortgage broker a visit.
Not only will they help you decipher all the legal and financial jargon, but brokers also have access to deals that aren’t offered to the public direct. Best of all, they're free, so you've got nothing to lose.
