The average LTV has fallen from 91% in August 2007, to 74% today. As a result the average deposit required on a £150,000 mortgage has increased from £13,500 to £39,000.

Borrowers looking for fixed rate mortgage deals have seen an 83% drop in the number of deals available to those with just a 10% deposit. By comparison, the number of deals for those with a 40% deposit has increased by a staggering 2244%.

Michelle Slade, spokesperson for Moneyfacts.co.uk commented:

“A threefold increase in the size of the average deposit is likely to hit first time buyers the hardest. Unless they can get help from the bank of mum and dad, many may have to defer their dreams of owning their own home for a number of years until they have saved more.

“While the number of fixed rate deals slowly increases, the number of variable deals remains low.

“Lenders are worried about the rising risk of customers defaulting on variable rate deals when base rate starts to rise.

“On a £150,000 mortgage, borrowers with a tracker deal will see their monthly repayments increase by over £300 if base rate returns to 4%, an increase that may be a step too far for many borrowers.

“94% of variable deals come with tie-ins of around 3% of the mortgage, meaning many will be unable to afford to escape to a more manageable deal elsewhere.

“Although fixed rates are more expensive at present, they are likely to be a better option for those on a budget.

“If the Bank of England raises base rate sharply, those fixing now are likely to be better off in the long run than those locked into variable rate deals”.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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