The number of mortgage deals available to first-time buyers has reached its highest level since May 2019 as lenders brush off warnings from the Bank of England warning that they should not be lending to the riskiest customers.
Figures published by Moneyfacts, the financial analyst, showed there are now 405 mortgage deals available to first-time borrowers.
This is the highest monthly total since Sam Woods, head of the Bank’s Prudential Regulation Authority (PRA), warned mortgage companies they were being watched like a “hawk” after some started taking on increasingly risky customers.
Banks initially took deals out of the market but have since become more confident in lending to first-time buyers.
Moneyfacts said first-time borrowers with a 5pc deposit can get two-year fixed-rate mortgage charges 3.22pc in interest. This is significantly lower than the 3.41pc market average a year ago, and an even bigger reduction compared to February 2015, when the average rate charged was 5.04pc.
Similar falls have also occurred in the five-year fixed-rate market. A borrower will now pay an average of 3.52pc for their loan, versus 5.27pc five years ago.
Eleanor Williams, of Moneyfacts, said: “This seems to demonstrate that there continues to be competition among lenders in this ever-expanding section of the market.
"This may in part be due to lenders trying to attract the increasingly young first-time buyers, who they may then be able to keep on their books moving forwards as they remortgage over the years.”
Ms Williams said “swap rates”, which are one factor used by banks to decide mortgage rates, had fallen again in the last month.
This would generally lead to cheaper rates for mortgage customers, meaning some borrowers may want to hold off before taking out a loan.
“Although falls of this nature are likely to take a few weeks before they might filter through, there is hope that average rates may reduce even further,” she said. “It seems that lenders are now actively competing to attract these customers, regardless of whether they are a first-time buyer or are looking to remortgage with a low level of equity.”
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Policymakers had warned off banks from lending to first-time buyers as they were concerned about homeowners struggling to pay off mortgages in future.
Interest rates have fallen to record low levels meaning borrowers could be potentially unable to cope if rates were to rise significantly in future, they said.