Mortgage lending to fist time buyers picked up in June, reaching a two year high, according to the Council of Mortgage Lenders (CML).
First Time Buyer mortgage sales were up 28 per cent in the first half of 2010 compared with the first six months of 2009, suggesting that confidence is beginning to return to that area of the market.
This comes despite figures released this week showing that the average deposit needed to buy your first home is now around £35,000 or 24 per cent of the value of the home.
Moneyfacts research shows that the current average two year fixed first time buyer rate for borrowers with a 10 per cent deposit is 6.15 per cent, down from 6.48 per cent six months ago.
And for those fortunate enough to lay down 25 per cent of the property value, the average two year fixed rate has reduced to 4.11 per cent from 4.37 per cent during the last six months.
Louise Holmes, spokesperson for Moneyfacts.co.uk, said the upturn was thanks to a combination of falling house prices and lower rates on fixed rate mortgages.
“First time buyer mortgage rates have fallen over the past six months and it is understandable that they are using this as a window of opportunity.
“The fact remains that lenders will always offer a better rate to borrowers with a bigger deposit.
“First time buyers currently have to raise an average deposit of £44,030 for their first home. At this level, borrowers must surely be finding themselves reliant on the so-called ‘Bank of Mum and Dad’ to assist with raising funds.”
Although the figures show things are looking up for first time buyers the CML says the housing market is not in the clear yet.
CML economist Paul Samter said: "This is now the 12th consecutive month in which lending has been higher than its year-earlier levels.
"But we still expect house purchase activity to be muted in the coming months.
"Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the government's austerity measures and their possible impact.”
For first time buyer mortgage quotes click here »
© Fair Investment Company Ltd