First time buyers could pay through the nose in mortgage interest

According to a recent report first time buyers could end up paying a fortune in mortgage interest, with recent figures showing that some first time buyers are being hit by the highest interest rates in over seven years.

The information comes from the Bank of England, and suggests that some first time buyers may be forced to pay interest rates that are at the highest level since the year 2000.

The figures show that February saw the interest rates on two year fixed rate mortgages worth 95% of the value of the home rise to an average rate of 6.55%.

It is thought that the mortgage crisis has hit first time buyers hard, with many having very little to put down by way of a deposit, and as a result being financially penalised by having to pay far higher rates of interest on their mortgage borrowing.

Lenders are being far more careful about who they lend to and how much a risk they are prepared to take, and in addition to first time buyers sub-prime borrowers have also been hit hard by the turmoil in the financial markets.

One industry professional stated: ‘Banks are clearly now engaged in more active risk-pricing when it comes to mortgage lending, with riskier borrowers failing to benefit from the fall in expectations of policy rates. For first-time buyers this could clearly be a problem.’

There were just fifty thousand new home loans taken out in the month of January according to the Council of Mortgage Lenders, which further reflects the crisis that has hit the mortgage markets over recent month.

With fewer people able to afford a mortgage and more lenders exercising increased cautions over who they will lend to it seems that the situation could continue to get worse.