First Time Buyer Mortgages

Types of interest rate available to First Time Buyers:

* Variable rate - the mortgage rate varies at the discretion of the lender.

* Standard variable rate - the default variable rate the lender offers to mortgage borrowers with a standard residential mortgage.

* Tracker rate - a variable rate that is linked to an underlying public interest rate (typically Bank of England repo rate) by a predetermined margin. For borrowers the rate is often linked to the LIBOR.

* Fixed rate - the interest rate remains constant for a set period; typically for 2, 3, 4, 5 or 10 years. Longer term fixed rates (over 5 years) whilst available, tend to be more expensive and therefore less popular than shorter term fixed rates.

* Discount rate - where there is reduction in the standard variable rate (e.g. a 2% discount) for a set period; typically 1 to 5 years. Sometimes the rate is stepped (e.g. 3% in year 1, 2% in year 2, 1% in year three).

* Capped rate - where similar to a fixed rate, the interest the rate cannot rise above the cap but can vary beneath the cap. Sometimes there is a collar associated with this type of rate which imposes a minimum rate. Capped rate are often offered over periods similar to fixed rates, e.g. 2, 3, 4 or 5 years.

Property Ladder

The property ladder is a term widely used in the United Kingdom to describe an individual or family's lifetime progress from cheaper to more expensive housing. According to this metaphor, cheap houses for first-time buyers are at the bottom of the property ladder, and expensive houses are at the top. 'Getting on to the property ladder' is the process of buying one's first house, in the hope of leaving it for progressively better houses as one's salary rises. In times of inflation, such as the last 30 years of the 20th century in the United Kingdom, salaries rose exponentially in money terms, even though the purchasing power of the salary might not rise; but as the real cost of the fixed, or nearly-fixed, monthly loan repayment was eroded, the borrower was able to afford to take on a bigger loan to buy a more expensive property. Over this period many people, by repeating this process several times, were able to acquire successively more expensive properties at comparatively modest real cost. The process was assisted by the low ancillary costs of house purchase, ease of borrowing, a favourable taxation system, a national culture of owner-occupation and a Government policy of obliging local councils to sell their housing stock to sitting tenants at a discount. The resultant demand has culminated (by 2005) in a historically high level of property prices