Best Mortgages for First Time Buyers

Read on as we provide you with the best first time buyer mortgages to put your mind at ease and secure you a great mortgage deal.

Updated: May 18, 2024
Matt Crabtree

Written By

Matt Crabtree

CompareBanks is reader-supported. When you click through some links on our site, we may earn an affiliate commission. Learn more

First time buyer mortgages can seem complicated if you are new to property investment. However, first time buyers are in a great position with mortgage lenders rushing to finalise the mortgage completion process with attractive mortgage rates and incentives.

In this article, we will explore the best mortgages for first time buyers and eliminate the misinformation, enabling you to choose your favourite mortgage deal.

ProviderScoreDetails
1. Nationwide★★★★★Click Here
2. Barclays★★★★★Click Here
3. Lloyds Bank★★★★Click Here
4. Yorkshire Building Society★★★★Click Here
5. Santander★★★★Click Here
6. Halifax★★★★Click Here
7. TSB★★★★★Click Here
8. Teachers Building Society★★★★★Click Here

What Is a Mortgage?

A mortgage is a loan to buy a property. It is given by a mortgage lender and usually covers a long loan term, such as 25 years. This is because most mortgages require a substantial amount of borrowing due to the staggering cost of buying a home.

When you apply for a mortgage, you will need to place a deposit. For example, you might place a deposit of 20% of the property value, with the remaining 80% covered by the mortgage loan. 

So, if you are buying a property worth £300,000, a 20% deposit would total £60,000, with the remaining £240,000 of the property value borrowed from the lender under the mortgage.

How Do Mortgages Work?

To apply for a mortgage, you will need to follow these easy steps:

1. Complete a Mortgage Application

Your first step is to complete a mortgage application with a lender.  A lender is usually a bank or another type of financial institution. You must provide evidence of your identity and financial income when making an application. 

Your credit score will be checked and you must provide details of the deposit you have at your disposal and the estimated value of the property you want to buy.

2. Agreement in Principle

Once your application is complete, your lender will inform you of your application's success and give you an ‘Agreement in Principle’. An ‘Agreement in Principle’ is also known as a ‘Mortgage in Principle’ and is an informal promise by the lender to grant you a mortgage. 

You can show this document to estate agents when making an offer on a property. However, an ‘Agreement in Principle’ is not a binding document and is based on the information you have given to the lender.

3. Find a Property

If you have not already found the property you want to buy, now is the time to do so. You must make an offer on the house via the estate agent who will then inform the seller. If the seller accepts your offer, you are ready to move forward to the next stage of the mortgage process.

4. Finalising Your Mortgage

Once you know exactly how much you are buying the property for, you must inform your lender. They will then amend the documents they have stored on you when providing you with an ‘Agreement in Principle’.

You will then need to contact a solicitor who will carry-out checks on the new property on your behalf so it is vital that you factor legal fees into your costs. You will also transfer the deposit to them when required.

Once the solicitor has completed all necessary checks and paperwork and the deposit has been transferred accordingly, you will sign your new mortgage agreement with the lender and the property will be transferred to you officially.

What Is a Credit Score?

A credit score is a numerical value given to your credit rating.

Every time you apply for a credit card or make monthly payments on a personal loan, credit reference agencies receive notification of the data and update your own personal credit history.

Credit scores help a lender to judge how likely it is that you would repay a debt, based on your previous behaviour. A higher credit score will result in more choices of lenders and financial products in addition to lower interest rates and favourable loan terms.

In the UK, TransUnion, Experian and Equifax are the three credit reference agencies that record your credit history. You can create an account with each credit reference agency so you can view your credit rating and keep a track of positive and negative marks on your credit file.

What Is a Good Credit Score?

A good credit score varies between each credit reference agency as they each possess their own credit score bands.

  • Experian — A good credit score with Experian is 721 and above, with the highest Experian credit rating reaching 999.
  • Equifax — Under Equifax, a good credit score starts at 531, with Equifax’s credit score bands reaching 1,000.
  • TransUnionTransUnion requires a score of 604 and above to achieve a good credit rating, with 710 being the highest credit score possible.

Can I Get a Mortgage With Bad Credit?

It is still possible to get a mortgage with bad credit although you could have fewer options and rates available to you. For example, a lender may approve your mortgage application but at a higher interest rate. Or, you might need to pay a much larger deposit to secure the mortgage loan.

What’s the Difference Between Interest-Only and Repayment?

An interest-only mortgage requires lower monthly payments as you are only paying interest to the lender. You are not repaying any of the debt owed under your mortgage offer so the amount of money borrowed never decreases.

A repayment mortgage results in higher mortgage payments each month as you are paying interest to your lender as well as repaying some of the money borrowed. So, every time you pay your mortgage repayment, a small amount of the debt is reduced.

It is more common for mortgage borrowers to apply for a repayment mortgage as it is the sensible option to reduce the amount of money borrowed from the lender. However, some borrowers may opt to adopt an interest-only mortgage to keep monthly payments low if they are struggling financially.

What’s the Difference Between Fixed and Variable Rates?

A fixed rate mortgage offers an interest rate that does not change during the mortgage deal period which is usually 2, 3, 5, or 10 years. So, if you secure a fixed mortgage with an interest rate of 5.45%, you will pay an interest rate of 5.45% throughout this time. 

You are tied into a fixed rate contract and you will need to pay an early repayment charge to switch deals or clear your outstanding balance.

A variable rate mortgage offers an interest rate that does change according to the Bank of England base rate and the lender’s preference. You are not tied into this deal, however, so you are free to switch deals or clear your debt whenever you like.

At a Glance, First Time Buyer Pros and Cons

So, what are the pros and cons of purchasing a property as a first time buyer?

Pros

✔️ Incentives — Many lenders offer incentives to first time buyers with a good credit rating, such as favourable interest rates or cashback.

✔️ Investment — Purchasing a property is a good investment to make for the future.

✔️ Security — Owning your own home provides security for yourself and your family.

✔️ Lower deposits — You could pay as little as a 5% deposit as a first time buyer under the government’s mortgage guarantee scheme.

Cons

❌️ Interest rates — A mortgage always comes with significant interest rates that mean the majority of your monthly repayments repay interest to the lender.

❌️ Property values — There is no guarantee that the value of your property will rise over time with some properties entering negative equity, meaning that you owe more money to the lender than what your property is worth.

❌️ Deposits — As a first time buyer, you might have a smaller deposit available as many homemovers can increase the size of their deposit when they sell their current property.

❌️ Repossession — It is essential to remember that your home can be repossessed if you default on your mortgage repayments.

8 Best First-Time Buyer Mortgage Deals — Reviews

We have reviewed the best first time buyer mortgages to provide you with in-depth information and first-hand knowledge:

1. Nationwide 2-Year Fixed — Best Overall Deal

Features:

  • Product fee: £0
  • Interest rate: 5.51%
  • Follow-on rate: 7.99%
  • Early repayment fees: Up to 3%
  • £500 cashback incentive
  • Annual overpayment allowance: 10%

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.51%, your monthly repayment will total £1,229.37.

From this £1,229.37 monthly repayment, £918.33 is interest and £311.04 is deducted from the money borrowed from the lender. 

After the 2-year mortgage has expired, you will have paid £29,504.88 in monthly repayments, of which £22,039.92 is paid in interest and £7,464.96 will be deducted from the original money borrowed.

The Nationwide 2-Year Fixed offer is the perfect mortgage deal for first time buyers. You will receive a great interest rate of 5.51%, with a follow-on rate of 7.99% after the two years. So, at a rate of 5.51%, if you borrow £200,000 to buy a property worth £300,000, you will pay monthly repayments of £1,229.37.

There is no product fee to pay with this deal, ensuring you can save your cash for your borrower deposit and any other fees.

An early repayment fee is applicable, however, up to a rate of 3% of the outstanding balance. So, if you want to pay the amount borrowed within the first year, you will face a fee of 3% but if you repay the debt in the second year, you will pay a 2% fee.

A £500 cashback incentive is provided when you finalise this mortgage, offering the first time buyer a warm welcome into their new home. You can also repay up to 10% of the original amount borrowed without being charged any fees.

2. Barclays 5-Year Fixed — Best for Low Interest Rate

Features:

  • Product fee: £899
  • Interest rate: 4.85%
  • Follow-on rate: 8.74%
  • Early repayment fees: 2%

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 4.85%, your monthly repayment will total £1,151.77.

From this £1,151.77 monthly repayment, £808.33 is interest and £343.44 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £69,106.20 in monthly repayments, of which £48,499.80 is paid in interest and £20,606.40 will be deducted from the original money borrowed.

The Barclays 5-Year Fixed mortgage is a great option for first time buyers who are looking for the lowest interest rate possible.

You can secure a mortgage rate of 4.85% with this deal, so you could pay £1,151.77 each month when borrowing £200,000 for a property valued at £300,000.

There is a product fee of £899 to pay when applying for this mortgage, however, and it is important to note that the follow-on interest rate is 8.74% after the 5 year deal has expired.

An early repayment fee of 2% is applicable to this deal. So, if you decide to pay the debt in full before the deal has expired, you will need to pay a fee of 2% of the remaining balance.

3. Lloyds Bank 5-Year Club Lloyds Fixed Rate — Best for Incentives

Features:

  • Product fee: £999
  • Interest rate: 4.58%
  • Follow-on rate: 8.74%
  • Early repayment fees: Up to 5%
  • £250 cashback for greener homes

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 4.58%, your monthly repayment will total £1,120.77.

From this £1,120.77 monthly repayment, £763.33 is interest and £357.44 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £67,246.20 in monthly repayments, of which £45,799.80 is paid in interest and £21,446.40 will be deducted from the original money borrowed.

The Lloyds Bank 5-Year Fixed rate deal for Club Lloyd account holders offer a very low interest fee of 4.58%. This means your monthly repayments will be as little as £1,120.77 each month when borrowing £200,000 for a £300,000 property. However, you must be a Club Lloyd account holder which requires a £3 monthly fee to maintain the bank account.

The follow-on interest rate for this mortgage is 8.74%, however, which is the interest rate you will pay once the 5-year deal has expired.

You will pay a product fee of £999 to secure this deal, although you could gain £250 cashback if you purchase a greener home with a grade A or B Energy Performance Certificate.

Early repayment fees of up to 5% of the outstanding balance are payable, however, if you decide to pay the debt in full at an earlier date than planned.

4. Yorkshire Building Society 2-Year Tracker — Best Tracker Mortgage

Features:

  • Product fee: £995
  • Interest rate: 5.79%
  • Follow-on rate: 8.74%
  • Zero early repayment fees

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.79%, your monthly repayment will total £1,263.05.

From this £1,263.05. monthly repayment, £965.00 is interest and £298.05 is deducted from the money borrowed from the lender. 

After the 2-year mortgage has expired, you will have paid £30,313.20 in monthly repayments, of which £23,160.00 is paid in interest and £7,153.20 will be deducted from the original money borrowed.

The Yorkshire Building Society 2-Year Tracker deal is a good mortgage for first time buyers who are economically aware of the financial environment around them.

A tracker mortgage charges the borrower the same base rate from the Bank of England, which is currently 5.25%, plus a fixed fee. The fixed fee charged by Yorkshire Building Society is 0.54%, making the interest rate of this tracker mortgage totalling 5.79%.

So, when borrowing £200,000 to purchase a home for £300,000, you will pay a monthly amount of £1,263.05. However, the follow-on interest rate is 8.74%.

A significant benefit of this mortgage deal is that you will be charged zero early repayment fees as you are not tied to a fixed rate deal. This also allows you to switch deals freely if you find a better deal.

5. Santander 3-Year Fixed — Best for Cashback Incentives

Features:

  • Product fee: £0
  • Interest rate: 5.79%
  • Follow-on rate: 8.50%
  • £500 cashback on completion
  • Early repayment fees: Up to 2%

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.79%, your monthly repayment will total £1,263.05.

From this £1,263.05. monthly repayment, £965.00 is interest and £298.05 is deducted from the money borrowed from the lender. 

After the 3-year mortgage has expired, you will have paid £45,469.80 in monthly repayments, of which £34,740 is paid in interest and £10,729.80 will be deducted from the original money borrowed.

The Santander 3-Year Fixed mortgage deal is a great mortgage deal for first time buyers who want a cashback incentive from their lender.

You will receive £500 cashback on completion and you will pay zero product fees, saving you your hard earned cash.

The interest rate payable with this mortgage is 5.79%, resulting in monthly payments of £1,263.05 when borrowing £200,000 for a property valued at £300,000.

However, as you are tied into a 3-year fixed deal with Santander, you will face early repayment fees of 2% of the outstanding balance. So, if your outstanding balance is £80,000 and you repay this amount in full, you will face charges of £1,600 in early repayment fees.

6. Halifax 10-Year Fixed — Best for Long Term Mortgages

Features:

  • Product fee: £0
  • Interest rate: 4.88%
  • Follow-on rate: 8.74%
  • Early repayment fees: up to 6%
  • Possible £250 cashback

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 4.88%, your monthly repayment will total £1,155.24.

From this £1,155.24 monthly repayment, £813.33 is interest and £341.91 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £138,628.80 in monthly repayments, of which £97,599.60 is paid in interest and £41,029.20 will be deducted from the original money borrowed.

The Halifax 10-Year Fixed mortgage is a great first time buyer mortgage if you want a long term deal at a great rate.

You will receive a fixed interest rate of 4.88% across a 10-year period, paying £1,155.24 each month when borrowing £200,000 for a property worth £300,000. However, after the 10-year period expires, you will face an interest rate of 8.74% so it is important to switch deals on time.

If you decide to repay the outstanding balance of the mortgage before the 10-year deal expires, you will face early repayment fees of up to 6%. So, if you owe £100,000 on your mortgage, a 6% fee to pay it all in full at an earlier date will cost you £6,000.

You could secure a cashback amount of £250, however, providing first time buyers with a generous bonus when buying their first home. However, the property you are purchasing must score a grade A or B on their Energy Performance Certificate rating.

7. TSB 5-Year Fixed — Best for Zero Product Fee

Features:

  • Product fee: £0
  • Interest rate: 5.14%
  • Follow-on rate: 8.74%
  • Early repayment fees: Up to 5%

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.14%, your monthly repayment will total £1,185.55.

From this £1,185.55 monthly repayment, £856.67 is interest and £328.88 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £71,133.00 in monthly repayments, of which £51,400.20 is paid in interest and £19,732.80 will be deducted from the original money borrowed.

The TSB 5-Year Fixed deal is a solid mortgage deal for first time buyers looking for zero product fees.

You will pay an interest rate of 5.14% each month, resulting in monthly repayments of £1,185.55. The follow-on interest rate for this mortgage loan with TSB is currently 8.74% so it is essential that you change deals in a timely manner after the 5-year deal expires.

Early repayment fees of up to 5% are applicable to this deal, however, decreasing by 1% each year as the mortgage loan progresses. So, if you pay your debt in full when you have 3 years left on the deal, you will pay a 3% early repayment fee of the outstanding balance, falling again to 1% in the remaining year.

8. Teachers Building Society 5-Year Fixed — Best for Teaching Professionals

Features:

  • Product fee: £0
  • Interest rate: 6.49%
  • Follow-on rate: 8.79%
  • Early repayment fees: Up to 3%
  • Overpay 10% of the balance per year

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 6.49%, your monthly repayment will total £1,349.16.

From this £1,349.16 monthly repayment, £1,081.67 is interest and £267.49 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £80,949.60 in monthly repayments, of which £64,900.20 is paid in interest and £16,049.40 will be deducted from the original money borrowed.

The Teachers Building Society specialise in helping teaching secure mortgages when buying a home. So, if you are a teacher, the Teachers Building Society could help you to secure a good first time buyer mortgage much easier than with other lenders.

You will pay an interest rate of 6.49% with the 5-year fixed deal, resulting in monthly payments of £1,349.16. A follow-on interest rate of 8.79% is applicable, however. Deposits of as little as 5% are accepted by this lender however, as long as you meet their criteria.

Early repayment fees of 3% of the outstanding balance applies, however, when paying the amount borrowed in full. Although, you can overpay 10% of the outstanding balance without any charges.

Leading First-Time Buyer Mortgages: The Verdict

If you are a first time buyer who is looking for a mortgage, you are in a much better position than some property purchasers. Lenders love first time buyers! After all, you are not tied into a property chain and can move fast to buy a home. You could also offer lenders a good credit score with an unblemished credit history, looking favourable on paper.

Our favourite first time buyer mortgage is the Nationwide 2-Year Fixed deal, offering an interest rate of 5.51% and a £500 cashback incentive. 

However, other deals are available, depending on your circumstances. For example, teachers can secure a strong mortgage deal with a 5% deposit with the Teachers Building Society. Or, you could gain a 2-year tracker mortgage with Yorkshire Building Society that does not tie you into a fixed deal and early repayment fees.

Related Guides:

FAQs

Will mortgage rates change over the lifetime of my mortgage deal?

Can I get a joint mortgage?

How much deposit do I need to buy a home?

Related Articles

Second Home Mortgage: Comparison, Lenders & Rates
Are you interested in purchasing a second home? If you are looking for financing...
Compare Commercial Mortgages in 2024
Whether you are moving to new premises for business purposes or branching out to...
Best Limited Company Buy-to-Let Mortgages
Are you looking to expand your property portfolio and invest in the housing market?...
How to Remortgage With Bad Credit
Remortgaging is a great way to get a better deal on your current mortgage rate....

Mentioned Banks

About Barclays Bank Barclays is a British multinational investment bank and financial services company. It was founded in 1690 and is headquartered in London. Barclays originated...
Learn More
About Lloyds Bank Lloyds Bank is a British retail and commercial bank. One of the ‘Big Four’ clearing banks, it was founded in Birmingham in 1765. It is the largest retail bank...
Learn More
About Santander Santander UK is a British bank. Though it is a British company and autonomously managed, it is entirely owned by the Spanish Santander Group. Santander is one...
Learn More
About TSB TSB is a UK-based retail and commercial bank. It is a subsidiary of the Sabadell Group. The TSB we know today came to be in 2013, formed from Lloyds TSB Scotland PLC...
Learn More
About Halifax Formerly known as Halifax Building Society, Halifax is a British bank. It is named after the town in West Yorkshire where it was founded in 1853 as a building...
Learn More
About Nationwide Nationwide is a British building society and mutual financial institution. Headquartered in Swindon, it has additional offices in Glasgow, Bournemouth, Northampton...
Learn More
About Union Bank Union Bank, or Union Bank of Nigeria, was founded in 1917 as Colonial Bank. Its name was changed to Barclays Bank Dominion, Colonial and Overseas in 1925 after...
Learn More
About Founded in 1864 as Huddersfield Building Society, the company grew organically until 1975, when it became part of the largest merger between building societies to date. In 1994...
Learn More