Comparing mortgages has never been more important for first time buyers.  The importance of first time buyers for the UK housing market can not be under estimated. Without them, there would be a total collapse in the property market, from the bottom end, relatively low value property, to the top of the ladder involving properties worth millions of pounds.  The problem, and reason to be concerned is that the number of mortgage approvals are at a 15 year low, a record which is expected to be broken several times during 2008.

The reason behind the low number of mortgage approvals can be seen as a side effect of the credit crunch.  As banks have taken a severe hit through risky lending strategies focused on the Sub-Prime borrowers, the entire banking industry is now perhaps overly cautious when it comes down to lending out money.  100% mortgages are a thing of the past, with borrowers now required to put down a minimum of 10% the value of property.  Keeping in mind the average house price in the UK at the minute, deposits for first time buyers are going to be in the region of 10k – 20k.

First time buyers are required to save this money for a mortgage deposit at a time of global economic downturn. Oil prices are exploding upwards, food prices, gas and electricity prices are all rising at unprecedented levels, far above levels of inflation. Taking these factors into consideration, saving 10k – 20k for a mortgage deposit, the average first time buyer is likely to struggle.

So what kind of mortgage offers are available to first time buyers, and how do they compare? Generally speaking, an interest rate of around 7% is to be expected. On a £100,000 interest only mortgage, this would see repayments at around £580 per month. In many areas and city centres of the UK, a property for £100,000 is unrealistic. Therefore, an interest only mortgage of £160,000 would equate to repayments of around £930 per month. A 25 year repayment mortgage however, would see repayments in excess of £1100 per month.

The sums involved are staggering, considering the average UK wage is estimated to be approximately 23k, meaning that after tax, less than £1,400 will be available, assuming no student loans are to be deducted.  As the average first time buyer is likely to be earning under 23k, it makes the sums even more difficult to justify purchasing a first time property in the current climate.  With this in mind, it has never been more important to compare mortgages.

If you're new here, you may want to subscribe by Email. Knowledge is Power!