Higher fees likely to homebuyers with smaller deposits

According to recent data, banks and building societies are penalizing homebuyers with a lower deposit by charging more in the way of mortgage fees. First time buyers, who have no previous property from which to use any equity as a deposit, are likely to bear the brunt of these charges, and many who are already struggling to scrape together any form of deposit will find that taking out a mortgage is now even more expensive than they may originally have thought.

The affordability level for buying property in the UK is now at its highest in fifteen years, and on top of soaring properly prices buyers now have to consider the cost of repayments, with four interest rate rises of 0.25 percent each over the past nine months. Buyers have to take out a hefty loan in order to purchase the property and then have to make repayments at a higher rate of interest on the money that they borrow. All of this adds up to a bleak outlook for first time buyers wishing to get their foot onto the property ladder.

The situation is made worse by the fact that unless these buyers can raise a small fortune upfront, generally around ten percent of the loan value for the mortgage, many lenders are slapping extra charges on top of the mortgage loan, often amounting to around two thousand pounds. This is classed as a higher lending fee, and for the many people unable to raise the initial ten percent deposit, this is an addition cost that will further hike up the cost of property purchasing.

One industry spokesperson stated: 'When you look at the amount, I think it is a way of boosting profits.' Another official stated: 'With first-time buyers paying an average of £145,000 on their property, they could end up spending £5,500 on higher lending charges and stamp duty alone.'