Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

No-Deposit Mortgages Could Cost London FTBs £73,000 More in Interest

London first-time buyers using a no-deposit mortgage could pay over £73,000 more in interest during the first five years of homeownership compared to those purchasing with a 15% deposit, according to research from Benham and Reeves. The findings highlight significant cost differences for buyers considering 100% mortgages versus traditional deposit options.

The research, reported by Mortgage Solutions, is based on a typical first-time buyer property in London priced at £471,687. A buyer using a 100% mortgage would need to finance the entire purchase price, resulting in estimated monthly repayments of £3,331. In contrast, a buyer with a 15% deposit of £70,753 would require a mortgage of £400,934, reducing monthly repayments to £2,226.

Over the first five years, a no-deposit mortgage holder would pay an estimated £158,104 in interest, compared to £84,834 for a buyer with a 15% deposit. This results in an additional £73,270 in interest costs during the initial five-year fixed period.

The research also found that buyers using a no-deposit mortgage build equity more slowly. After five years, a no-deposit borrower would still owe an estimated £429,945, while a buyer who started with a 15% deposit would owe £352,193.

These findings are relevant for letting agents and inventory clerks monitoring trends in first-time buyer activity and mortgage products in the London property market.