Buying a house becomes an option again

Getting a mortgage could allow you to own a lovely Victorian terraced house, such as this
"As banks are somewhat jumpy about lending large sums, you’ll need a credit record as pristine as the driven snow to qualify."
  • | by Kristian Dando

If you can get the money together for a deposit, then now isn’t a bad time to be thinking about buying a house  – historically low interest rates, which experts predict will be staying put for the foreseeable future, and a skyrocketing rental market mean that taking the big leap on to the property ladder could save you a few quid over renting.

In fact, a study from a major bank suggested that buying over renting could save as much as £200,000 over the course of a lifetime compared to paying a landlord.

The good news is that the amount of mortgages available to prospective buyers with modest sums towards a deposit is on the increase – in June, there were 63 products on the market available to potential homeowners which required just a 5% deposit. This is nowhere near the level of low-deposit mortgages that were available during the time leading up to the financial crash, but it’s certainly improvement on the relatively barren years for low-capital prospective homeowners of the years since 2008.

But as banks are somewhat jumpy about lending large sums, you’ll need a credit record as pristine as the driven snow to qualify, and may have to pay quite a lot in interest. Taking your deposit up to 10% opens up the prospect of more tantalising offers, like First Direct’s two-year fix at 4.19 per cent with a £999 fee  or Yorkshire Building Society’s 4.74 pre cent fixed-rate  five-year fixed-rate deal.

Tracker deals, which are linked to the base rate set by the Bank of England, are popular at the moment, but borrowers with smaller deposits don’t stand to save as much with these sorts of deals as those with meatier down payments.

Those with 5% mortgages will struggle to find one, but those with a 10% deposit burning a hole in their pocket could snap up Co-operative Bank’s lifetime deal, pegged at 4.09% above base rate. At the moment, this means a gives a starting rate of 4.59%. If you want out at any point, you’ll need to cough up £140.

So, it seems that getting on the property ladder might not be as prohibitive as it once was. And if you’re still struggling to come up with the readies for a deposit yourself, then you could always take the increasingly-popular route of buying a property with a friend.

If you’re in any doubt speak to your local, friendly independent financial adviser, who will gladly help you navigate the occasionally daunting path to getting your own home. In the meantime, you can compare mortgage rates right here and see if there’s a deal which is right for you.