Lenders are trying to attract first time buyers get onto the housing ladder by keeping interest rates as low as possible. With more and more first time buyers looking for 100% mortgages or no deposit mortgages interest rates have been kept low.
If you take the rise in interest rates over the last year they have risen by one percent, but the prevailing rate for buyers without a deposit is 6.49% compared with 5.85% a year ago, so lenders have not passed on the full rate rise.
Lenders have realised that saving a deposit for the first time buyers can take many years and in that time the house prices are likely to have increased by more than the deposit saved. The 100% mortgage is just one way that lenders are looking to bring first time buyers onto the housing market.
However you should always be careful when taking out a mortgage for the full amount, as if house prices were to fall, you would end up owing more money than the house is worth (Negative equity).
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