Podcast: Mortgage products for first-time buyers

In this episode of the ESPC Property Show podcast, Paul and Megan are joined by ESPC independent mortgage advisors Martyn Johnson and Paul Demarco to discuss the current mortgage market and what it means for first-time buyers. The panel explores how falling interest rates and calmer market conditions are improving affordability, shares practical advice for those looking to get onto the property ladder, and highlights the importance of early mortgage preparation.

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Key Insights

Current market for first-time buyers

First-time buyers are in a stronger position than a year ago, mainly due to falling interest rates and less competition driving property prices upward. Improved affordability has reduced mortgage payments, increasing disposable income and borrowing potential. Properties are also selling closer to home report valuations, averaging around 101.9% over valuation, helping buyers retain funds for costs such as maintenance, LBTT, and legal fees. While buyer enquiries are rising, the market remains relatively steady, with competition expected to increase in spring.

Interest rates

Mortgage interest rates have improved, with fixed rates generally ranging from below 4% to just over 4% depending on deposit size. Buyers with a 5% deposit may see rates around 4.6%, while those with 15–20% deposits could access rates near 4.1%, and larger deposits may secure rates as low as 3.7–3.8%. Experts predict rates could fall further to around 3.25% by the end of the year, supported by strong competition among lenders aiming to attract borrowers.

Practical steps for first-time buyers

First-time buyers are encouraged to consult a mortgage advisor early to assess affordability and understand borrowing potential, even before building savings. Securing a Decision in Principle (DIP) is a key early step, as it demonstrates borrowing eligibility before seriously viewing properties or instructing solicitors. Buyers should also focus on maintaining a strong credit profile by ensuring all addresses are consistent across financial records, building credit responsibly through tools like credit cards, and addressing any adverse credit issues promptly. Importantly, buyers should not assume age is a barrier, as many lenders now offer mortgages into later life, provided income or pension provisions are in place.

Flexible mortgage products

Modern mortgage products offer increased flexibility, including Joint Borrower, Sole Proprietor arrangements, which allow family members to support affordability without being listed as property owners. This can help avoid additional dwelling tax and potential capital gains tax implications for the supporting party. These products can also be beneficial for younger buyers, including students, providing additional pathways onto the property ladder.

Remortgaging advice

Homeowners approaching the end of their mortgage term should contact a mortgage advisor promptly to review available options. Failing to act can result in being automatically moved onto a lender’s standard or “unavailable” rate, which is typically far more expensive. Exploring the wider mortgage market allows borrowers to secure more competitive rates and suitable terms that better match their financial circumstances.

To wait or not to wait for a larger deposit

In most cases, buyers are advised to enter the property market as soon as they are financially able rather than delaying to save a larger deposit. Property values in high-demand areas such as Edinburgh tend to rise annually, meaning waiting may increase purchase costs. The interest rate difference between smaller and larger deposits is often relatively small, sometimes only around half a percent, which may not justify delaying purchase. Buying earlier allows homeowners to build equity and potentially reduce borrowing costs over time through remortgaging and overpayments.