Halifax have revealed that a mortgage offering first time buyers a loan with only a five per cent deposit, but with a huge interest rate was never supposed to make it onto the system.

The first time buyer mortgage, which charged 8% above the base rate, appeared on the intermediaries section of the banks website “by mistake” according to the company.

The mortgage also featured an early repayment charge which was the equivalent of a staggering 6% of the loan, and borrowers could borrow up to £7.5million.

Brokers were shocked at the offer that appeared on their system, as it would have made Halifax just the fifth lender to offer a mortgage with a 5% deposit. The other four mortgages offer interest rates ranging from 5.99% to 6.99% and are all fixed rate deals so the buyer is protected from interest rate increases in the next few years.

A mortgage expert from Obligo, Chris Gardner explained, “If this product had been genuine, it would have been the harakiri of home loans. Not only is the rate highly punitive but if rates rise then payments would become unmanageable almost instantly. This is the type of highly dangerous product, first-time buyers – or indeed any buyers – should steer clear of, given that rates can only go in one direction.”

David Hollingworth, a broker from London and Country revealed that he had been sceptical that the product was real as soon as he’d seen it. “There are very few 95% mortgages available, but this was not priced not to attract customers. It’s clearly designed to set alarm bells ringing if someone tries to process it as a genuine application.”

Halifax revealed that the loan was just a dummy product which was used for borrower’s applications when the original application they had made had seen a product drop from the market.

Halifax released a statement explaining, “There was an error this morning which resulted in three products incorrectly appearing on the Halifax Intermediaries website. These were products that are not live and were showing due to a systems error, which has now been corrected. The maximum LTV across the range, for new applications, is 90%.”

Bank of England figures revealed that after paying off a record £71.billion in the last three months of 2010, Britain’s mortgage customers reduced their debt by a further £5.8billion during the first three months of 2011 showing an increasing determination to reduce their debts.

Housing equity figures from the Bank of England showed that home owners have now been reducing their average mortgage debt for three years in a row, a staggering £63.7billion invested in properties in that three year spell.

In the first three months of 2007 homeowners actually removed £13.4billion worth of equity from their homes with first time buyers finding it easy to get on the ladder and house prices constantly increasing.

Chief UK economist at IHS Global Insight, Howard Archer said, “The overall marked softening in house prices from their late 2007 peak levels has made housing equity withdrawal less attractive.”

Whilst homeowners are looking to reduce their mortgage debts by as much as possible, Moneyfacts, a price comparison magazine have revealed that there are more mortgage deals on the market than at any other time since November 2008.

First time buyers miss out though as the majority of these mortgage offers are being aimed at existing homeowners looking to remortgage, with 808 of the mortgages requiring a deposit of 25%.

Those with less than 10% of deposit available will struggle to find a mortgage with very few deals available although those savers who can put together a ten per cent deposit will be cheered by the news that the number of 10% mortgages increased from 176 to 261 in the last year.

Insolvency practitioner from HW Fishe, David Birne warned that the paying down of mortgages was bad news for the high street, adding, “The reduction of mortgage debt is always a good thing for the individual household but when it happens on such a scale and over such a time period it can have major ramifications for business, as less money makes it on to the high street.

“The paydown of debt is a double-edged sword. Consumers battening down the hatches and paying down their mortgages is one of the main reasons the high street is struggling as it is.”

Archer agreed, adding, “The ongoing appreciable net injection of housing equity is adding to the constraints on consumer spending, most notably including negative real wage growth, the increasing fiscal squeeze, high unemployment and elevated debt levels,” he said.

Fair Investment Company however feel differently and could have the answer to every young potential house buyers woes. They have conducted research that shows that saving £525 a month into a stocks and shares ISA from the age of 25 cold build up a savings pot of over £35,000 by the age of 30, more than enough money to get on the housing ladder.

What’s more, by investing their ISA allowance each year, the saver will avoid paying any tax on their savings or interest, as well as being able to save for their future without frittering money away on things that may not be necessary.

Latest statistics from the HMRC show that the average amount of money invested in a stocks and shares ISA each year if less than 60% of the entire allowance, although Fair Investments research still shows this is enough.

With the current ISA allowance a little over £10,680 a year, some one saving 60% of that would put aside £525 a month, which in a stocks and shares ISA for 5 years paying around 7% a year would leave them with nearly £37,000 by the end of those five years.

Oliver Roylance-Smith from the Fair Investment Company explained, “Saving the full ISA allowance each year is unrealistic for most people. This calculation shows that even if you can’t afford to invest the full amount each year, and don’t benefit from market leading returns every step of the way, you can still build up a healthy fund.
“If the ultimate goal is being able to own a home, saving over a five year period seems like a reasonable time frame.”

The Council of Mortgage lenders figures are widely regarded as the most accurate on the market and come a month behind Halifax and Nationwide figures because of the depth of their research.

Despite April showing the fourth monthly increase in a row, the figure was still 2% down on April last year, and the CML added that recent figures from the Bank of England suggested that mortgage lending was unlikely to increase much more in the next few months.

A survey carried out on a group of chartered surveyors also showed that people who were thinking about moving house, and first time buyers were being put off by continued mortgage rationing and economic uncertainty.

CML director general, Michael Coogan added, “The market continues on a stable footing and the increase in house purchase lending is a good sign that the stability will continue throughout 2011.”

“However, the economic outlook, coupled with Bank of England subdued approvals data for April, suggests a muted summer for mortgage completions so we do not expect further increases in lending over the coming months,” he added.

He did note that there was a slight reprieve on the financial burden put on first time buyers, explaining that in March and April last year the average deposit had been 21% but that was down to 20% in April this year.

A RICs survey found that 28% more estate agents had seen prices fall in the last three months than had seen prices increase, although the falls were around 2%.

RICs housing spokesperson Ian Perry added, “Buyer interest in purchasing property remains flat across much of the country and there is little sign of this changing any time soon.”

“Uncertainty over the economic outlook remains as important as the availability of mortgage finance in depressing demand.”

Existing mortgage customers worrying about negative equity will be unhappy to hear that house prices have fallen by 1.2% in the last quarter according to the Halifax report, which showed that one in three of nearly 1000 people surveyed thought that house prices would increase this year, with the rest expecting prices to stay level or increase.

Overall, more of those in the UK believe that house prices will increase, rather than decrease, although only just, leaving a positive house price outlook score of just nine percentage points.

57% of Britons believe any house price movement in the UK in the next year will be small, expecting a change of less than 5% either way.

Remortgage customers will be no more sure what steps to take next as 26% believe that house prices will stay the same this year, while 24% believe that there will be changes of more than 5% in house prices, either up or down, showing a real mixed back of opinions.

First time buyers will be pleased to hear that half of all Britons feel that the next three months is a good time to buy a new home, three times more than the number who felt now was a good time to sell a house.

The housing market is set to remain subdued as only 15% believed that selling and buying in the next 12 months was a good idea.

Many consumers are very concerned about their job security, and don’t want to move house as a result. Household finances and potential increasing interest rates were two other reasons given for not moving house.

Housing economist from the Halifax, Suren Thiru said, “More Britons expect house prices to rise rather than fall over the next year.

“This is likely to partly reflect the relatively low burden of servicing mortgage debt.

“However, confidence in the UK housing market is likely to remain subdued over the coming months, given consumers’ concerns over the outlook for the UK economy in general, and the jobs market in particular.”

The research found that 3.4million mortgage borrowers were planning to reapply to remortgage in the next year, with nearly a third of those worried that their current credit situation will affect their chances of securing another mortgage.

Of those first time buyers who don’t have a mortgage at the moment, one in four potential borrowers don’t think they earn enough money to get a mortgage whilst one in five don’t think they have enough of a deposit to be able to by a house.

Managing director of L&G Mortgage Club, Ben Thompson explained, “Many borrowers don’t realise that chasing the headline rates that high-street lenders advertise may lead them to making multiple attempts at securing a mortgage.

“At present, more than half of all borrowers say they would apply for a mortgage directly with a high street lender with the majority doing so purely because they have an existing relationship with one rather than because they knew they offered the most appropriate deals.

“It’s clear that borrowers would benefit from professional, impartial advice that will potentially open up a lot more financing options for them and brokers have a golden opportunity to tap into this part of the market.”

Director of the Association of Mortgage Intermediaries, Robert Sinclair, said: “There is a discernible gulf between the needs of many borrowers and the reality of what is being offered by high-street lenders. Such is the dearth in appropriate products that more people need better advice and a wider choice and this represents a vast pool of potential business for brokers.

“Brokers need to educate the consumer and be more proactive if they are to turn this latent demand into new business. The mortgage market isn’t suddenly going to spring back to pre-down turn levels so it’s up to brokers to make the most of the opportunities out there.”

During the February to May period, the firm sold an average of 111 units a week, which is an increase of 9% over the same period last year.

Also up was the average selling price, which rose 4% to £182,000, helped by a large number of homes sold in the London area.

The group claimed that the current market conditions were perfect for growth and that they hoped to be able to push forward now uncertainties are in the past.

Bellway released a statement which said, “The uncertainties that affected consumer confidence during the challenging autumn trading period appear to have diminished and, encouragingly, there has been a return towards a more normal reservation pattern with a healthy spring selling season, despite ongoing concerns remaining in the wider economy.”

Bellway’s net debt did however increase to £57million up to the end of May, although the firm predicted that this figure would fall substantially by the end of this year.

They pointed to the 1,600 extra reservations they had made for homes to be completed in the remainder of this year or through next year as a reason for the debt reduction.

They will also have been encouraged by government plans announced on Wednesday which will see thousands of acres of public land sold to housing developers to tackle the growing shortage of housing in the country.

The extra 100,000 homes will be a boost to those looking to become a first time buyer, or those looking to move but unable to afford the mortgage payments on something bigger in such a high demand market.

The move could create an extra 25,000 jobs in the next four years.

The prediction, made as a result of a survey by the Royal Institute of Chartered Surveyors (Rics) found that the price of rent has been increasing and will continue to do so in the next few months.

Many potential first time buyers are renting homes whilst saving for the deposit needed to make that first step onto the housing ladder, and any extra money they spend in rent is less money they can save.

From those surveyors surveyed, 42% more reported seeing an increase in the cost of renting in the last three months than didn’t with the biggest increases coming not surprisingly in London and the south east of the country.

When asked about the next three months, 33% more surveyors thought that the cost of renting would increase, than those who thought it would fall.

Rics spokesperson, James Scott-Lee explained, “Although we are beginning to see more mortgages aimed at first-time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market.”

“There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise.”

In a separate survey by LSL Property Services, the firm behind Your Move and Reeds Rains, the average rent for April stood at £692.

First time buyers should not give up however as it seems mortgage companies are starting to cater to your needs.

Two years ago there were just 62 products on the market aimed at first time buyer, a figure which now stands at 183.

Mortgage lenders are now looking to homeowners looking to remortgage and fix their interest rate ahead of several expected Bank of England base rate increases later this year and into next year.

The average two year fixed rate loan costs just 4.41% now, down from 4.5% in May and at the lowest level since the beginning of this year. The average five year fixed rate loan has also fallen, from 5.6% to 5.41% according to research from finance information magazine, Moneyfacts.

Moneyfacts claim that the reduction in mortgage rates was being helped by a fall in swap rates. Swap rates, upon which many deals are partially based, and because the Bank of England’s Monetary Policy Committee are not expected to increase the base rate until the last quarter of the year, if at all.

Despite the risk of the base rate increasing falling away slightly, many homeowners are still keen to fix their mortgage rate, just so they know where they are for the next two to five years, and this demand has seen an increase in competition in this sector of the mortgage market.

In the last few days, lenders including Halifax, Nationwide, Lloyds TSB and NatWest have all slashed the interest they charge on their fixed rate mortgages, reacting to competition from each other.

First time buyers will also be encouraged by the number of loans available to those with only a 5% deposit, as there are now 31 mortgages on the market for these people, up from 24 at the beginning of the year, and the most on the market since December 2008.

In the same period, those with a 10% deposit can now chose from 244 mortgages, instead of the 199 available six months ago. There are 545 mortgages for those with a 15% deposit, up from 480 at the beginning of the year.

The Halifax House Price Index showed that prices increased 0.1% between April and May, mirroring a slight rise shown last month by the Nationwide house price index.

Despite the small increase, house prices over the past three months are still down. April’s drop of 1.4% had a large impact on the three monthly figures which show between March and May house prices fell by 1.2%.

An economist at HIS Global Insight, Howard Archer noted that the quarterly total was down 4.9% year on year, the biggest fall seen since October 2009.

Archer added, “The fact that Halifax reported that house prices could only rise fractionally in May after a particularly sharp drop in April reinforces our view that further weakness lies ahead in the face of ongoing muted housing activity and difficult economic fundamentals.”

Halifax released their index reading at a time when other data continues to point at strained household finances, with wage growth falling behind inflation and taxes increasing.

Housing Economist at Halifax, Martin Ellis explained, “House prices continue to drift modestly downwards as measured by the underlying trend. Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances. Confidence is also weak as a result of uncertainty about the economic and employment outlook.”

Ellis was however a little more positive, adding that the low interest rates, coupled with moderate improvements in the economy later in the year should support housing demand and prevent prices falling too far.

Remortgage customers will be pleased to see that interest rates look set to stay low.