First-timers miss out on best mortgages for years

MORTGAGE rates have plummeted to their lowest level in five years, but only for borrowers with large deposits, official figures reveal today.

For first-time buyers who have less than a quarter of the value of their target property in up-front cash, there is still no respite from the lending drought.

Today's Bank of England statistics show how new tracker and standard variable rates have dropped with unprecedented speed.

By the end of last year the cost of the average two year tracker- which rises and falls in line with the Bank of England base rate -had fallen to 4.95 per cent. This was down from 5.78 per cent in November and a peak of 7.04 per cent in October.

The last time trackers cost less than five per cent was in January 2004.

For standard variable deals, the fall was from 6.34 per cent on average to 5.38 per cent, the lowest since November 2003.

The price of fixed-rate mortgages has also come down, although less spectacularly and only for buyers or owners needing to borrow 75 per cent or less of the value of their home.

A two-year fixed-rate mortgage costs 4.79 per cent on average, while a typical five-year fixed rate was 5.31 per cent.

These are the best rates for borrowers with plenty of equity since the spring of 2006.

Mortgage experts said the latest official data did not yet reflect the impact of the cuts last month and this month, which lowered the Bank's base rate from three per cent to a record-breaking 1.5 per cent.

Ray Boulger, senior technical manager at brokers John Charcol, said: "These figures are even more historic than usual because the falls have been so much more dramatic than before. Bear in mind they will be even lower when the figures for February come out."

The best tracker rate for new borrowers is currently offered by First Direct at 3.89 per cent, but most are slightly above four per cent.

Most City commentators expect the Bank of England to cut rates again in the spring possibly to as low as 0.5 per cent.

The figures also show that despite the sharp falls in mortgage rates, banks and building societies have been boosting their profit margins over recent months.

Although tracker rates fell by almost a full percentage point on average in November, the Bank of England's base rate was cut by 1.5 per cent.

Most new tracker deals are priced at about 2.5 per cent over the base rate compared with as low as 1.01 per cent below the base rate two years ago.

Fees for arranging fixed and tracker mortgages have also increased dramatically.