The level of mortgages taken out by first-time buyers in January fell by 10% to 38% reveals Mortgages Direct, the financial subsidiary of Spicerhaart.

The newly found confidence displayed by first-time buyers in December dropped dramatically following the Bank of England’s decision to raise the base rate a further 0.25% to 5.25% in January. This rate rise knocked the confidence of the group once again as they struggled to afford a property.

Percentage of first-time buyers taking out mortgages

Mortgages Direct director, Peter Gladdy said, “As expected, the last interest rate rise has not been good news for first-time buyers who are still having difficulty getting onto the property ladder. This group is essential for a healthy mortgage industry and another interest rate rise would have been very damaging to the market.”

High loan to value mortgages were at their lowest level for a year in January at 8%, down from 13% in December. This decrease is a result of first-time buyers pulling back and all other borrowers exercising caution in the wake of the rate rise.

The survey also indicates that fixed rate mortgages were at their highest level since the survey began at 97%. Two year fixed rate deals proved particularly popular as borrowers opted to protect themselves against further interest rate hikes. With two year fixed rates being the most popular choice, homeowners appear confident that the recent rise in interest rates will be short-lived.