Choice of small deposit mortgages grows by a third for First Time Buyers

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Personal finance data company Moneyfacts has just released figures that show the number of mortgages for borrowers who only have a small deposit has increased by almost one-third in the past year. Whilst this is good news in itself, our view is that mortgage borrowing costs may start climbing this year as the Government’s Funding for Lending scheme is withdrawn for mortgages and money markets and lenders start to anticipate a rise in the Bank Rate early next year.

Moneyfacts notes that there are currently 534 loans for borrowers with deposits of up to and including 10%, which is an increase from 414 in January 2012. The wider choice is largely due to the Government’s Help to Buy scheme, introduced last year to encourage banks and building societies to lend to borrowers with small deposits.

The Government’s Funding for Lending scheme allocated £69billion to low cost loans to banks and building societies and played its part in reducing mortgage interest rates last year. But rates could start to rise now that Funding for Lending’s focus has been moved away from households and onto financing the recovery of the UK’s small business sector.

As with any choice, it pays to take the advice of an independent professional when searching for the right mortgage product for you. If you are looking to buy in 2014, it may be worth your while arranging your mortgage in principle well before you make your final choice of property.