Getting a foot on the property ladder

Buying a house is the biggest purchase we will make in our lives, whether with our partners or going it alone. In England the average house price is now £212,266 and according to the Land Registry, properties in London on average cost a whopping £336,409. No matter what you earn, your mortgages is, more than likely, going to eat up a huge chunk of your salary.

So getting the right mortgage at a rate you can afford at a loan-to-value deal that is achievable, is no easy task. If you don’t have much of a deposit you face higher monthly repayments and if you try and save a deposit on your own you have to contend with depressingly low savings rates.

To make things worse mortgage lenders are cracking down on interest-only mortgages. The FSA has prompted the move as it believes too many people were taking cheaper interest-only mortgages with no intention of ever repaying them. According to Thisismoney.co.uk, of the 11.4 million mortgages in Britain, 43% of them (by value) are interest only. Lloyds is the first bank to initiate the move. It says it will no loner accept selling a business, coming into inheritance or selling the property itself as a method or repayment. It is filling this gap with an increase in 90% mortgages which it hopes will help first time buyers, but with repayment rates on 90% mortgages still being about 5% most first time buyers going it alone are going to struggle.

So if interest-only mortgages are out of the question, what other options do you have available to you right now if you are considering getting on, or moving up, the property ladder?

Now that we have a new, and potentially unstable government, now’s the time to lock in a fixed-rate mortgage deal. Not only is the future uncertain, but with planned tax increases and spending cuts, getting on top of your budget and planning your future is imperative. A fixed rate deal makes this much easier as you know what you are going to be paying each month for up to five years. But another good reason to snap one up now is that they are at their lowest rate since the Bank of England’s mortgage rate recording began in 1995.

According to the Bank of England, the average rate charged on a two-year fixed rate deal for someone with a 25% deposit dropped to 3.83% in April 2011. The BofE believes this decrease is due to increased competition in the mortgage market.

Check out Santander’s award-winning range of mortgages if you are interested in snapping up one of these fixed-rate deals.