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First-time buyers finding it harder than ever to get a mortgage

Monday, 12 May 2008 1:15 PM

Evidence of the continuing decline of first time buyers in the mortgage market emerged today as Charcol revealed only four per cent of its customers were first time buyers in March.

The mortgage broker blamed the lack of mortgage deals above 90 per cent loan to value for the decline. It also accused mortgage lenders of charging borrowers who could not provide a deposit of at least 25 per cent of the value of the property they wished to buy up to three quarters of a per cent more in interest.

Kate Tucker, technical manager at Charcol, said this meant that a £150,000 mortgage would cost around £93 more in interest every month for someone using only a 10% deposit, compared to a borrower taking £150,000 mortgage with a 25% deposit.

The news follows a report in the Sunday Times which revealed that Halifax is forcing borrowers who do not use a mortgage broker to apply for a mortgage and only have a 10 per cent deposit to open current accounts with the bank.

Meanwhile Charcol said its customers were opting for fixed rate mortgages in record numbers.

It says 78 per cent of its customers arranged mortgages on a fixed rate in April, up from 64 per cent in April.

Ms Tucker said the trend was very high reflecting continuing uncertainty about future interest rates.

"These peaks normally occur when Bank of England rate rises are expected, but as the Bank rate is widely expected to fall over the next year most of the high take-up was because fixed rates were a quarter to a half a per cent cheaper than trackers," she said.

Tucker added the second consecutive increase in the number of people opting for fixed rate mortgage also implied borrowers were nervous about the strength of the economy and feared rates would soar as they did in the early 1990s.

First time buyers made up only four per cent of Charcol mortgagers in April, down from seven per cent in March, and less than half of last year's average of 10 per cent. Meanwhile demand for buy-to-let purchases continued to fall in April, making up only two and a half per cent of total the mortgage brokers applications.

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