Lots of mortgage options on offer

BUYING a home is cheaper than renting, a recent report suggests.

According to figures from Halifax, the average monthly cost of mortgage repayments, repairs and insurance is 16 per cent lower across the UK than the typical rent paid on an equivalent property.

Rising rents combined with falling house prices in recent years mean the traditional view that renting is cheaper than buying no longer holds true.

In the South West, average monthly buying costs in December stood at £697 – with average monthly renting costs five per cent higher, at £737.

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That's all very well, you might think, but what about getting a mortgage and saving up enough for a deposit?

According to one Exeter-based broker, that is not as difficult as people think.

Peter Marriott, at Westexe Mortgage Solutions, said: "In recent years there's been far too much negativity and that has imprinted itself on the public's mind.

"I think it's about time people became more positive about what's out there. It's not all doom and gloom. Subject to status and affordability, there are mortgages out there for people, and the situation for first-time buyers is certainly not as bad as the majority of people think.

"We're slightly busier than we were this time last year, and 30 per cent of our clients are first-time buyers. There are still opportunities to buy good properties and there are some very good mortgage products available."

We asked Peter for some examples of the types of mortgages available to first-time buyers in Exeter.

Taking a 25-year-old couple with a joint income of £40,000, how much would they have to pay every month to buy a two-bedroom house in Exwick, recently advertised in the Echo for £159,950?

The lowest monthly repayments he found were £746.65, on a 35-year variable rate mortgage (currently 4.79 per cent) from Melton Mowbray Building Society (see panel). However, the product comes with arrangement and booking fees totalling nearly £1,000.

A similar product from Halifax has a valuation fee of just £355, but comes with a higher interest rate of 5.19 per cent, meaning monthly repayments of £785.39.

Both examples assume the couple can put down a deposit of £8,000, leaving them needing a 95 per cent loan-to-value mortgage.

An increasing number of lenders are offering 'family assisted' mortgages. Bath Building Society, for example, offers a 4.79 per cent fixed-rate product which could see the couple paying £752.95 per month, with the loan secured against their parents' property.

Steps being taken by first-time buyers to enable them to get on the property ladder include repaying loans over a longer term, such as 30 or 35 years.

And while it's worth bearing in mind interest rates will not remain at their current low levels forever, few observers expect the base rate to rise soon.

"The scheme the Government launched last year releasing money to lenders to provide loans to businesses and individuals has had the effect of bringing fixed rates down," said Peter. "I believe they are the lowest they have ever been.

"There's a common view that property values have levelled off now. So I really believe it's a good time to act. It's a buyers' market and if you can find a suitable property it's a good time to buy."

Martin Ellis, housing economist at Halifax, said: "The sharp decline in home-buying costs over the past few years, combined with a significant increase in rents, has greatly improved the financial attractiveness of buying a home. This shift has contributed to the increase in the numbers of house purchases."