A £250,000 flat, a £25,000 deposit, and two offers sitting in your inbox. One is a two-year fix at 4.49% with a £999 arrangement fee. The other is a five-year fix at 4.19% with no fee. On the £225,000 you’d be borrowing over 30 years, that’s £1,139 a month against £1,099.
The cheaper deal also ties you down for three years longer. Leave in year one and the early repayment charge takes nearly £6,700.
Which one wins depends on things no comparison table can know. Whether you’ll still be in that flat in 2029. Whether your salary will have moved. Whether the boiler holds out. The honest answer to “what’s the best mortgage for a first-time buyer” is that there isn’t one. There’s a best mortgage for your deposit, your timeline and your tolerance for your payments changing.
The four numbers that narrow the field
Before product names matter, four figures do most of the work: your deposit as a percentage of the purchase price, how long you expect to stay, the term you pick, and how much your payment could rise before it actually hurts. Get those down and the shortlist shrinks fast. There’s a longer version of that method in what type of mortgage is best for first-time home buyers, decided by four numbers.
Deposit size moves you between rate bands
Lenders price by loan-to-value, and the bands are not subtle. On a £250,000 home, borrowing £237,500 at 5.29% (a 95% loan) costs roughly £1,317 a month over 30 years. Put down 10% instead and you borrow £225,000 at closer to 4.49%, which is about £1,139. That extra £12,500 in deposit saves around £180 a month, every month, for three decades.
Which is why “save a bit more” is often the most valuable mortgage advice a first-time buyer gets. Crossing from 95% to 90% LTV typically buys a rate cut of half a point or more. Crossing 85% to 80% does it again.
How long you stay decides the fix
A long fix is a bet you won’t need to move or remortgage during it. First homes are frequently not forever homes: a job move, a second child, a road you discover at 11pm. If there’s a real chance you’ll sell within three years, a five-year fix with a 3% early repayment charge is a quietly expensive choice.
Fixed rates: the default for good reasons
Most first-time buyers end up on a fixed rate, and the reason is boring and correct. You know the payment. When your budget already carries legal fees, a survey, a sofa and a washing machine, certainty is worth something.
A two-year fix at 4.49% against a five-year fix at 4.19% is a fairly typical spread. The shorter deal costs more each month but hands you an exit to remortgage in 24 months, useful if your loan-to-value will drop a band or your income is about to jump. The longer deal insures you against rates rising in the meantime. Neither is wrong. One fits your next two years, the other fits your next five. A breakdown of the main mortgage types and what each one really costs is worth ten minutes before you pick a side.
Trackers and variables: cheap until they aren’t
A tracker follows the Bank of England base rate plus a fixed margin. They’re often the lowest rate on the board and frequently come with no early repayment charge, which appeals to buyers planning to overpay or sell within a couple of years. The catch is arithmetic, not opinion. On a £225,000 repayment mortgage, a 1% base rate rise adds roughly £130 a month in the early years. Two of those and the “cheap” option has cost more than the fix you turned down.
Variable deals come in more than one shape, and the difference between discounted, tracker and standard variable rates matters a lot more than the marketing suggests. There’s a plain-English walkthrough of mortgage loan types and what the menu actually costs you if you want the mechanics.
Low-deposit routes beyond a standard mortgage
If 5% or 10% is out of reach, there’s no single best type of mortgage for first-time buyers to fall back on. There are, however, four routes that genuinely work.
- 95% mortgages. Back in volume across the market. Expect a rate roughly a point above 90% deals and stricter affordability checks. Fine if you’re confident about staying put, expensive if prices wobble.
- Shared ownership. You buy 25% to 75% of the property and pay rent on the rest. The combined outgoings often land close to a full mortgage, and there’s a service charge on top, so run the whole figure before you fall for a flat.
- Guarantor or family-assisted mortgages. A relative’s savings are held as security, or a parent’s income supports affordability. Rates sit near standard deals. The cost is family risk if things go wrong.
- A Lifetime ISA. Not a mortgage at all, but a 25% government bonus on up to £4,000 a year (£1,000 free) is the cheapest deposit money you’ll ever find, provided you buy under the £450,000 cap.
Term length is a bigger lever than most buyers realise
Stretching from 25 to 30 years on a £225,000 loan at 4.19% cuts the payment from about £1,211 to £1,099. That £112 a month matters in year one. It also adds roughly £32,000 of interest across the life of the loan.
Thirty-five years takes the payment down to around £1,022 and pushes total interest past £204,000. A long term is a cashflow tool, not a saving. If you take one, ask about overpayment limits (usually 10% of the balance a year during a fix without penalty) and aim to pay a little extra in the early years, when each pound does the most damage to the interest bill.
The charges that lurk after the fix ends
Every fixed deal expires. When it does, you roll onto the lender’s standard variable rate unless you remortgage or switch products. That rate usually sits several points above the fix, and the jump is brutal. At 7.99%, the £1,099 payment becomes about £1,650. Set a calendar reminder eight weeks before your fix ends, not eight days.
Product fees also matter more on smaller loans than the headline rate suggests. A £1,499 arrangement fee on a £150,000 mortgage is the same as paying about 0.2% extra on the rate for five years, which quietly wipes out the cheaper-looking deal. Ask every lender for the total cost across the fix period, fees included.
How to compare two real offers in ten minutes
Put both key facts documents side by side and total four things across the fix period: monthly payments, product and booking fees, any bundled valuation or legal costs, and the early repayment charge you’d pay if you left early. That last number is the one people skip and later regret.
Do this before you view anything, ideally with a decision in principle already in your inbox. It tells you what a lender will genuinely lend, takes about 20 minutes, and sellers treat an offer more seriously when one is attached. The full sequence, numbers at every stage, is in the first-time buyer mortgage playbook.
Then run the test no broker can run for you. Take whichever deal you’re leaning towards, add two percentage points to the rate, and look at the new payment. If it still clears your other bills with room left over, buy the flexibility or the lower rate as you prefer. If it doesn’t, you have your answer. You’re not choosing between a good mortgage and a bad one. You’re choosing how much certainty you can afford, and for most first-time buyers with a 10% deposit and no plans to move, that means a five-year fix on a term short enough to pay down real capital, plus a reminder in the diary for the year it ends.