Building societies are boosting first-time buyers – research

Building societies are currently offering the most competitive mortgage deals for first-time buyers compared with high-street lenders, research suggests.

Analysis of 90% and 95% loan-to-value mortgages by comparison website Moneyfacts found that new borrowers will find home loans from building societies on average priced lower than the market averages of all lenders.

Out of the seven biggest high street banks, the average rates combined are lower than building societies for two- and five-year fixed mortgages for first-time buyers, but Moneyfacts said the lowest rate deals might not be the best on a true cost basis.

Rachel Springall, finance expert at Moneyfacts, said: “High street banks traditionally have more margin to price their mortgages lower, but the lowest rate deal may not be the best choice when all the costs and incentives associated with the mortgage are included. Saving money on the upfront cost of a mortgage is incredibly important for first-time buyers who may have exhausted their cash on a deposit, legal fees and moving costs.

“The key challenge for first-time buyers is affordability, with interest rates higher than they may have expected this year, and affordable housing remaining in short supply.”

Springall highlighted that mutuals have made various efforts to be innovative, such as the Track Record mortgage from Skipton Building Society, the £5,000 deposit mortgage from Yorkshire Building Society and the partnership between Leeds Building Society and Experian to potentially help consumers to boost their credit score.

She added: “Even with such innovation, a recent study by Coventry Building Society for Intermediaries noted ‘regional differences are acting as barriers’ to those looking to step onto the property ladder for the first time. Any borrower looking to get their foot on the property ladder would be wise to seek independent advice to ensure they find the right deal for them.”