Best mortgage deals for first-time buyers

Our first-time buyer has a 10% deposit and is looking to buy a £200,000 property over 25 years. She’d prefer to fix her interest rate as she expects the base rate to rise in the future.

For ease of comparison, we’re assuming any fees are paid up front, and if you can afford to do so it’s worth it. If you don’t, interest will be charged on the fees, which will add hundreds of pounds to the overall cost of your mortgage.

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Fixed-rate deals

Yorkshire Building Society has the most competitive fixed-rate deal for first time buyers. It charges 2.49% until October 2018. There is no fee and £250 cashback on completion. Repayments are £807 a month, and £19,118 over the first two years. The standard variable rate is 4.74%, which would push repayments to £1,008 if our buyer doesn’t remortgage (or rates don’t change).

Alternatively, if buyers are willing to pay an up-front fee it’s possible to get a sub-2% fixed rate mortgage with a 10% deposit. The Nottingham Building Society has the lowest fee (£999), and the rate is fixed at 1.99% until January 2019. This mortgage costs £762 a month and £19,287 over the first two years. Watch out for the eye-watering 5.74% SVR, which will bump repayments to £1,102 after the fixed rate period. 

Longer fixed-rate deals

If you want to lock in a rate for longer, you’ll need to pay a £200 monthly premium, roughly, to access the longest ten-year fixed-rate deals.

Nationwide, charges 3.99% with no initial fee. Monthly repayments are £949, so this deal costs £22,776 over the first two years. The SVR is 3.74%, so repayments will actually fall to £933 a month, in 2026, assuming the base rate doesn’t change, though it’s quite likely it will during the next decade.

The Bank of Ireland’s five-year 3.14% fix has no fees and £500 cashback. That’ll cost £867 a month and £20,308 over the first two years. After two years the variable 4.24% rate will push repayments to £954. 

Variable-rate mortgages

For buyers who are willing to risk a rate rise (or gamble on a further rate cut), the Leek Building Society lends at 1.89% for two years, at a rate that tracks its SVR (5.19%). That costs £753 a month and £18,072 over two years, as there are no up-front fees. Buyers will have to find almost £300 a month more to cover mortgage payments when the SVR kicks in.

Larger deposits

Better rates are available with larger deposits.

At 75% loan-to-value, Yorkshire Building Society offers a two-year fix at 1.74%. There are no upfront fees and £250 cashback sweetens the deal. Monthly repayments are £617 so the effective two-year cost is £14,558. The standard variable rate is 4.74%, so if rates don’t change repayments will rise to £835 per month.

Interest-only deals

If you’re looking for interest-only options, remember the rules are now a lot stricter and you’ll need to show a well-thought out plan for repaying the capital at the end of the mortgage. Monthly repayments are much lower than with capital repayment, but you'll pay more interest on an interest-only mortgage in the long run.  

Not every provider will lend on an interest only basis, so if you’re looking for one it’s best to speak to a mortgage broker. Our mortgage tool can help you get a feel for the rates on offer.  

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