It can be hard to decide on a mortgage product when there are so many to choose from.
A good mortgage broker will guide you through this difficult decision. When weighing your options, you should always consider mortgage products in the round.
For example, a product may offer hundreds of pounds in “cashback,” but there will likely be a higher interest rate attached, which means paying out more money over time.
Are you better off in the long run without the cashback and taking a lower rate product?
Lots of first-time buyer schemes have specifically targeted mortgage products, such as shared ownership and Help to Buy. But most first-time buyers are making a straightforward purchase and need a traditional mortgage.
First-time buyers can expect to pay on average around £209,000 to step onto the property ladder, according to the lender Halifax. These buyers typically need a deposit of between 5% and 10% of the property’s value.
Taking the average price paid by first-time buyers, that equals a deposit of between £10,450 and £20,900.
Assuming that price and a loan term of 25 years, here are some of the best mortgage deals available right now.
For 90% LTV (loan-to-value), there’s an initial rate of 1.74% fixed for two years. There are £1,409 in various fees attached to the product, but some of those can be added to the loan, rather than paid up front. Be warned, however, that this means you would pay interest on the fees. For the first 24 month, each payment would be £773.68.
This product is also available up to a 95% LTV, meaning buyers with only a 5% deposit may be able to borrow from the Loughborough. But the initial rate is higher at 1.99%, meaning a monthly repayment for the first two years of around £840.
At 90% LTV, there's an initial rate of 1.78% fixed until 31 July, 2021. The product comes with a £999 fee, which can be added to the loan, and has a monthly repayment of around £777 during the fixed period. There's an early repayment charge of 2%.
For a more than two year fixed period this 90% LTV product comes with a 1.79% rate, leaving the borrower with monthly repayments of £778 until 30 June, 2021. There is, however, a product fee of £1,495, which can be added to your loan, but which will increase your monthly repayments. There's also an early repayment charge ranging between 1.5% and 2.5%.
There is another very similar Yorkshire product that offers a free valuation and £500 cashback to the borrower. The product fee is also only £995. But the initial two-year rate is higher at 1.84%, meaning your monthly repayments would be around £783.
For 95% borrowers, Teachers offers a discount of 2.75% on its Standard Variable Rate, which is currently 5.24%, for two years. That means the rate is currently 2.49%, producing monthly repayments of about £890, but, as a variable rate, this could go up or down. There are also £1,228 in fees attached.
This product is 95% LTV and offers a discounted interest rate for the first two years. The discount is 2.69% off Monmouthshire's Standard Variable rate, which is currently 5.24%.
So the current discount rate is 2.55%, giving a monthly repayment of around £896, though this could go up or down throughout the first two years of the product. There are also only £150 in fees attached to the product, making it cheaper than many others on the market.