There are two ways to apply for a mortgage as a first-time buyer, the traditional mortgage route and the governments help-to-buy scheme. It is now commonplace to appoint a financial advisor to act on your behalf and find the right mortgage deals for your situation. A mortgage provider will consider individual/joint income and outgoings and, if affordable, agree to a mortgage arrangement in principle. The terms and conditions will vary dependent on your financial circumstances.

The help-to-buy scheme was introduced to assist first-time buyers looking to acquire their first home and applied to new builds only. This is a shared ownership option, with the homeowner required to fund upwards of 75% of the property’s value and a further 5% through a deposit with the government funding the balance. The homeowner can increase their interest in the property by buying part (or all) of the government's share at the market price. As a first-time buyer, advice from an experienced mortgage broker can be invaluable.

In times of economic growth, which ultimately reflects on house prices, it can be possible to obtain mortgage finance with a deposit of as little as 5%. In order to access some of the more competitive mortgage deals, you would likely require a 20% deposit. The deposit acts as an insurance policy for mortgage lenders, providing a degree of protection if house prices were to fall.

There is also the government help-to-buy program. This involves shared ownership through a government-backed scheme, with a typical deposit anywhere from 5% upwards. Even though the statutory affordability test has been removed by the authorities, mortgage lenders will still have an eye on the risk/reward ratio.

The first-time buyer mortgage market is very competitive, offering a variety of options such as:-

Fixed-rate mortgages

Fixed-rate mortgages are the most popular amongst first-time buyers, offering a degree of certainty in the early days of the mortgage and a potential discount on the mortgage lender's standard variable rate.

Standard variable rate mortgages

A standard variable mortgage rate is heavily influenced by base rate movements. While a useful tool when interest rates are falling, it can be counter-productive for homeowners when interest rates are rising.

Tracker rate mortgages

While standard variable rates are influenced by base rates, tracker mortgage rates are formally linked to a measure such as base rates. They tend to be set at a rate which is a fixed percentage above or below the base rate.

Discount mortgages

Discount mortgage rates are directly linked to the mortgage lenders standard variable rate with a fixed discount. The discounted rate will traditionally last anything up to 3 years.

Offset mortgages

An offset mortgage allows you to consolidate mortgage debt with savings and regular income. While the outstanding mortgage balance will vary over the month, it can lead to long-term interest savings.

The UK mortgage market is extremely well developed and very competitive. Whether looking at a fixed rate or a discount rate, these offers can be relatively short-lived but are an interesting way to entice first-time buyers into the market. Mortgage companies take a long-term view on first-time buyers, often reducing their initial returns for cross-marketing opportunities and the sale of additional services further down the line.

Even though first-time buyers tend to get a better deal on average, mortgage lenders are now more acutely aware of the dangers of neglecting existing customers.