Home Residential PropertyFirst-Time Buyers 10% mortgage would cost first time buyers £4,425 per year more

10% mortgage would cost first time buyers £4,425 per year more

by LLP Finance Reporter
10th May 23 3:58 pm

The latest research by specialist property lending experts, Octane Capital, has shown that first-time buyers opting for a 100% mortgage in the current market face a monthly mortgage repayment some £369 a month higher than those purchasing with just a 15% deposit. That’s an additional £4,425 per year. 

This week, Skipton Building Society announced the launch of its 100% mortgage, providing first-time buyers with a deposit-free foot up onto the property ladder at a rate of 5.49%. The five year fixed product is limited to 4.49 times income though, as well as a 35 year maximum term and a maximum property value of £600,000. 

However, research by Octane Capital has shown just what cost a 100% mortgage would come at when you consider the far higher monthly repayments required. 

The research shows that, based on the current first-time buyer house price of £238,742 across Britain, the average first-time buyer securing a traditional mortgage with a deposit of 15% is placing £35,811 upfront. 

This means they require a loan of £202,931 and at the current average rate of 4.22%, this equates to a full monthly repayment of £1,096 per month, or £714 for those making an interest only payment. 

In contrast, those opting for Skipton’s 100% mortgage at a rate of 5.49% would be facing a full monthly repayment of £1,465, or £1,092 for an interest only payment. 

This means that those making a full monthly repayment would be paying £369 more per month for a 100% mortgage, versus those who have placed a 15% deposit. That’s an additional £4,425 over the space of a year.

CEO of Octane Capital, Jonathan Samuels said, “For many first-time buyers, a 100% mortgage probably sounds too good to be true and this is unfortunately the case. If you do pass the strict lending criteria, you will find yourself very limited in terms of what you can buy, not to mention the fact you’ll pay substantially more for the pleasure. 

It may sound tempting for those who are saving tirelessly in order to accumulate a deposit, but as our research shows, you are far better off sticking with it than being tempted into a 100% loan to value mortgage product and paying a far higher price in the long run. 

What’s more, placing a deposit and borrowing less also leaves you far less susceptible to the risks of negative equity compared to those who are borrowed up to the eyeballs.”

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