Best Mortgage Rates for First Time Buyers

First-time buyer mortgage explained

What defines a first-time buyer in the UK?

A first-time buyer is defined in the UK as someone looking to purchase their first home who has never owned a residential property in this, or any other country.

At the start of 2024, UK Finance and Halifax estimated over 290,000 first-time buyers sought to join the UK property ladder the previous year.

What do you need to get a mortgage as a first-time buyer?

There are a couple of things first-time buyers need to get started on their journey to homeownership:

• Deposit: This is the amount paid upfront for a home. In July 2024, research conducted by property website Zoopla (using data from UK Finance and the Bank of England) found the average deposit to be £56,000. However, the amount you need to save will vary depending on the property and its location; usually you’ll need to put down at least 5% of the value of your prospective future home.

• Good credit score: As a mortgage is a type of loan, lenders will take your credit score into consideration to determine whether you can be trusted to meet repayments. A high credit score generally means you’re more likely to be accepted for a mortgage.

Before applying, it’s good practice to check your credit score and take steps to improve it if necessary. Find out what factors affect your creditworthiness and how to improve your credit score using our dedicated guides.

What is an agreement in principle?

Also known as a ‘mortgage in principle’ or a ‘decision in principle’, an agreement in principle (AIP) is an indication from a lender as to how much you may be able to borrow.

While it’s not compulsory for first-time buyers, an agreement in principle could provide a realistic budget for your property search and demonstrate your commitment to a seller or estate agent. But, remember an AIP is not legally binding and by no means guarantees a lender will make you an offer.

What does LTV mean?

The loan-to-value (LTV) reflects the amount of money you’re borrowing as a mortgage versus a property’s overall worth. The lower the LTV, the more of the property you own outright (also known as having ‘equity’).

Generally speaking, you’ll pay a higher interest rate (and therefore more expensive monthly repayments) on a mortgage that caters for a higher LTV, and vice versa. 

To work out what LTV ratio you may need, use our dedicated loan-to-value calculator.

How much could I borrow?

The amount of money a lender is willing to loan you as mortgage not only depends on your deposit and credit score, but other factors such as your regular incomes and outgoings.

Generally speaking, the maximum amount you can borrow is 4.5 times your income (although some lenders may offer higher multiples in a bid to tackle the issue of affordability faced by many first-time buyers).

However, as a lender will also consider your expenditures (such as tax and utility bills, insurance premiums and other debt repayments) to determine whether you could afford the monthly repayments, keep in mind you may not necessarily be eligible for the maximum loan.

In any case, stretching affordability by taking out the maximum loan could leave you facing difficulty if interest rates were to rise, or if you were suddenly unable to meet repayments for some other reason.

For further details, or for an indication of how much you may be able to borrow, visit our mortgage calculator page.

How long does it take to get a mortgage for the first time?

Once you’ve done the groundwork in finding your first home, the mortgage application process itself can take anywhere from two to six weeks.

However, there are further steps you’ll need to take before getting the keys to your property, such as:

• Getting a house survey: Also known as a home survey, this is where an expert surveyor inspects the condition of a property and identifies any faults or potential issues. While not a legal requirement, it’s often highly recommended to determine whether a property is worth the asking price. Depending on how thorough the survey is, it can take anywhere from a few days to a couple of weeks to receive the results.

• Conveyancing: The process of legally transferring ownership of a property; this includes exchanging contracts and completion (at which point the sale becomes finalised). The timeline varies depending on whether there is a chain (linked property purchases) but can take anywhere up to 16 weeks or more.

What are the fees when getting a first-time buyer mortgage?

There are more costs to consider aside from the deposit when it comes to buying your first home:

• Surveyor fees: This is the cost of an expert completing a survey of your prospective home and can range from a few hundred pounds to over £1,000 depending on the complexity of the property and level of detail.

• Legal fees: Cover the cost of solicitor or conveyancer undertaking all the necessary paperwork on your behalf (and any third-party costs they may incur) to ensure you become the legal owner of your property. Again, the amount can vary but it’s worth putting aside between £1,000 and £2,000 to cover these fees.

• Product fees: This can include arrangement fees and reservation fees (also known as ‘application’ or ‘booking’ fees) charged by a lender. Some mortgage deals may come with no upfront costs, while others cost in the region of £1,500.

• Broker fees: If you opt for the help of a mortgage broker, this will either cost a flat fee or incur a charge equivalent to a small percentage of the loan.

• Stamp Duty: Stamp Duty Land Tax (SDLT) applies to properties bought in England and Northern Ireland. Currently, first-time buyers don’t need to pay any Stamp Duty unless purchasing a property for more than £425,000. However, this temporarily heightened nil-rate threshold is set to be lowered to £300,000 following 31 March 2025.

• Mortgage Payment Protection Insurance (MPPI): After successfully getting a mortgage, you’ll need to consider whether you’d still be able to meet repayments if you were unable to work due to ill-health or unemployment. If not, you could consider taking out mortgage protection insurance; this type of policy is paid out monthly for up to a year after a successful claim (or until you return to work, whichever is sooner) and, in some cases, can cover up to 125% of your mortgage repayments.

• Home insurance: As a first-time homeowner, you may also want to protect your property (and its contents) against unexpected damage by taking out home insurance.

For a more detailed breakdown of the fees involved with getting a mortgage as a first-time buyer, read our guide on the costs of buying a home.

What type of mortgage should I get?

When it comes to selecting a deal, there is no ‘one-size fits all’ – the best mortgage deals for first-time buyers ultimately depend on their needs, circumstances and attitudes. Some of the most common types you may encounter include:

Fixed rate mortgages

The interest rate charged by this type of mortgage is guaranteed to remain the same over the course of a fixed term. While this can protect against rate hikes, it could also prove less cost-effective if rates were to decline.

Variable rate mortgages

In contrast, interest rates charged by variable mortgages can increase or decrease with little notice, either in response to the wider economic climate, to manage consumer demand and/or to help a lender meet internal targets. Standard Variable Rate (SVR) and discounted variable deals are two examples.

Tracker mortgages

A tracker mortgage is another type of variable deal with a rate guaranteed to rise and fall in line with the UK’s central interest rate. For this reason, you’ll often find them advertised as charging equivalent to the Bank of England base rate, plus or minus a set percentage.

Guarantor mortgages

Guarantor mortgages could give you a lift onto the property ladder if you have a poor credit score or lack a deposit. They involve a guarantor (often a close family member) using their own property or savings as collateral for your debt. Failing to meet mortgage repayments could result in a guarantor’s assets being repossessed.

Our guide to finding the best type of mortgage provides more information on these, and other available options.

Are there any banks or building societies that specialise in first-time buyer mortgages?

Although there aren’t any particular lenders that specialise in mortgages for first-time buyers, some offer specialist deals to support those who don’t meet standard criteria.

The Helping Hand range from Nationwide BS, for instance, lets first-time buyers borrow up to six times their income with either a five- or 10-year fixed mortgage that can finance up to 95% LTV. Similarly, Leeds BS’s Income Plus deals lend first-time buyers up to 5.5 times their salary. Both of these product ranges can be found on our charts.

There are also deals that can be accessed by first-time buyers with a poor credit score, such as the Reach range from Leeds BS, or those who don’t have a deposit. Skipton BS’s Track Record Mortgages, for example, accept a proven track record of paying rent in place of a deposit. However, as these and a number of other deals don’t meet the conditions to feature on our chart, you may wish to seek expert advice to explore all options available and for help finding a deal that best meets your needs.

Are there any first-time buyer schemes? What help is available?

The Government also offers help for first-time buyers; below, we summarise a handful of its schemes, but remember other support may be available depending on your circumstances and where in the UK you live.

Lifetime ISAs

If you’re aged 18 to 39 and saving towards a deposit for your first home, a Lifetime ISA could provide a welcome cash boost. Not only does this type of savings account earn tax-free interest, but the Government also applies a 25% bonus to contributions of up to £4,000 per year.

Introduced in 2017, the Lifetime ISA replaced Help to Buy ISAs which are now closed to new customers.

First Homes

With affordability often another obstacle to getting on the property ladder, the First Homes scheme offers new-build properties to first-time buyers in England at a minimum 30% discount. This means eligible borrowers can purchase a property with a smaller deposit and will have lower monthly repayments.

That being said, there are a limited number of these properties available, and councils may give priority to keyworkers, local residents or low earners. Furthermore, if you later decide to sell your property, the prospective buyers also need to meet the scheme’s eligibility criteria and must receive the same discount.

Shared ownership

Similarly, if you have a smaller deposit or want lower monthly repayments, you could consider shared ownership. This Government scheme allows you to purchase a portion of a property (either with savings or by taking out a mortgage) while paying rent on the remainder.

Over time, you can increase the portion of the property you own by buying more shares.

Right to Buy

If you’re a public sector tenant, meanwhile, the Right to Buy scheme could allow you to purchase your council home at a discount. The amount discounted will depend on the type of property, the region and for how long you’ve been council tenant, but ranges from 35% to a maximum 70%.

Mortgage guarantee

While the mortgage guarantee scheme applies to lenders, rather than borrowers, it supports first-time buyers by generating more higher LTV deals that can be accessed by those with a 5% deposit.

It achieves this by making it less risky for lenders to offer 95% LTV mortgages, with the Government protecting up to 95% of participating loans against losses incurred as a result of a borrower defaulting on repayments.

Between its launch in April 2021 up until June 2024, the scheme has supported the completion of 45,775 mortgages – 87% of which were first-time buyer purchases. However, as a temporary measure introduced to address the shortage of higher LTV mortgages during the COVID pandemic, it’s scheduled to end in June 2025.

Why does the Government want to support first-time buyers?

Governments often want to support first-time buyers onto the property ladder as homeownership can be good for the economy.

As more people look to buy homes, the increased demand can drive up property prices which in turn makes homeowners wealthier and more willing to spend – aiding the wider economy. It also generates the need for new homes, thus creating jobs for the likes of developers, tradespeople and estate agents.

In contrast, less demand could cause property prices to stagnate or even decline; under these circumstances, homeowners run the risk of falling into negative equity (where their property is worth less than the outstanding loan) and may limit their spending.

How to find the best deal

While it’s good practice to regularly compare mortgage rates when looking for the best deal, keep in mind the lowest price may not always be the most cost-effective. It’s also important to consider other factors, such as:

• Are there any product fees?
• Are there any added incentives? (e.g. a free valuation, free legal fees, cashback etc.)
• Does it allow overpayments?
• For how long do you want to fix? (If opting for a fixed rate mortgage.)

These details can all be found on our mortgage charts by selecting ‘view further details’ next to a listing.

What influences mortgage rates?

There are several factors lenders consider to determine their mortgage pricing, including:

• Bank of England base rate: Sometimes referred to as the ‘bank rate’, this is the amount the Bank of England charges other banks and building societies to borrow its money. You can find out more about the relationship between the central interest rate and mortgage rates with our guide to the UK base rate and how to respond to changes.

• Swap rates: Swap rates, meanwhile, reflect market predictions for how interest rates will move in the future.

• Supply and demand: How many people are looking to buy a home and whether there are enough properties available.

In turn, each of these can be affected by the wider economic climate. For instance, mortgage rates skyrocketed between December 2021 and August 2023 after the Bank of England hiked the base rate 14 consecutive times in an attempt to tackle chronically high inflation.

Will mortgage rates go up or come down?

Further cuts to the Bank of England base rate are expected in 2025 which could see mortgage rates tumble.

Nevertheless, the market is prone to fluctuations and it’s not unusual for lenders to buck the overriding trend. Prospective first-time buyers would therefore be wise to review rates regularly and consider seeking advice if uncertain.

Should I speak to a mortgage broker?

Speaking to a broker could remove a lot of the paperwork and hassle involved with getting a mortgage, while also gaining you access to exclusive products and rates that aren’t available to the public.

Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to obtain specific qualifications before they can give advice.

For more information, consult our guide on whether to use a mortgage broker.

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