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With property prices on the increase across the UK, the asking price of London homes is once again becoming out of reach of the average first time buyer. A combination of strict approval criteria and high deposits means that many would be home owners can no longer afford to buy a property in capital. It has been calculated that over the last 12 months the prices have risen by 10%, leaving savers seeking free mortgage advice from London lenders.

The majority of mortgage products available to first time buyers have an LTV cap of 75%, which means borrowers raising a deposit of 25%, which for an average priced London property would be in the region of £25,000. Obviously if the trend in rising house prices goes on as demand continues to outstrip supply, this figure is going to become higher and less attainable. Although there are more high LTV products coming on to the market, even the return of 95% LTVs, the large majority of these are not available to a first time investor.

There is good news though for those who are happy to relocate. The rapidly rising prices are not as dramatic in Scotland, with a rise of just 2.2%, although the wise investor would think twice about relocating to Northern Ireland, where house prices dropped by nearly 9%. Borrowers are advised to consult with an independent broker or mainstream lender to get free mortgage advice in what might be harsh times ahead for first timers blighted by mortgage applications that favour those who already have a home loan.

This year only 35% of loans were for first time investors, which is the lowest figure since late 2007; and as it is these purchasers that dictate the success of the property market, there are bound to be dramatic changes afoot to help those with a small deposit purchase a home in London. Whether it is a return to high LTV loans, introduction of government schemes or the decision to relocate that makes the difference, getting the right free mortgage advice could save you thousands in the future.

A recent report has revealed that mortgage rates in London have fallen by 19% since 2008, helping to reduce the overall cost of living in a house in the UK. Although London is the most expensive place in the UK to run a home, an average of £3,000 more per year, residents are still benefitting from cheaper bills, less tax and cheaper maintenance. It has been acknowledged however, that the major factor in cheaper living has been the reduction of interest rates, which are currently at 0.5% for the 15th consecutive month.

The figures have been calculated by a housing economist at Halifax building society, and they clearly show that costs related to housing now use 27% of earnings, compared to 30% just two years ago. The mortgage rates in London have also dropped from an average 5.80% to 3.67%, a difference of 2.13%. As such, homeowners have been able to weather the harsh economic times a little easier than would have otherwise been expected.

For those who have a tracker mortgage, a fall of 2.13% has the potential to free up some much needed cash, but rather than reaping the rewards in the short term, borrowers are being encouraged to make extra payments on their mortgage before interest rates rise again, possibly as early as next year. By making extra payments, the mortgage debt will be lessened through increased equity in the property, and ultimately this means that it will be possible to access more favourable mortgage deals with lower interest rates.

Although this strategy may not see borrowers becoming better off as the interest rates rise, it does mean that the affect will be lessened. If you are considering making overpayments, consult your broker or lender to find out what would be the most effective way to do so. As all mortgage products are different, the way interest and equity is divided in repayments may vary. It is also worth considering using any savings you may have accumulated to make a lump sum payment on a mortgage. Often this is financially more productive that leaving savings in an account accumulating very little interest.

The Chancellor George Osborne has announced that the FSA will be abolished by 2012, a move which has the potential to make reasonably priced mortgage deals harder to come by in London. By handing over responsibility to the Bank of England it is hoped that the economy will be able to achieve stability, but this means that it is likely there will be stricter lending rules. The news is not good for first time buyers who are already finding it difficult to secure London mortgage deals.

The deals most likely to be affected are high LTV mortgages, specifically aimed at first time buyers with a small deposit, although official statements say that new regulations will see more competitively priced high LTV loans on offer. The aim of the new rules is to ensure that responsible lending is taking place and the goal is to keep lenders on the straight and narrow without punishing borrowers. Addressing the need for wide consumer choice with accessible fair deals appears to be a contradiction in terms with stricter lending based on arbitrary limits.

It is hoped that mortgage deals in London will see less of a cost difference between high and low LTVs, so if a borrower can only raise 10% of the deposit, they will not be penalised through higher interest rates. This is particularly important for Londoners as the cost of a property in the capital is significantly higher than anywhere else in the country, therefore it is much more difficult for borrowers to raise a sizeable deposit.

Rather than there being fewer mortgage products on the market for borrowers to choose from, lenders will instead offer a wider range of mortgage deals aimed at those who need them most with new lending criteria. It is hoped this will address the recent issues of those who actually have a good credit history and the ability to pay off a loan being refused a mortgage, such as first time buyers. By changing the rules, mortgage approvals will become fairer and the Bank of England will be able to find the stability the UK economy really needs.

Mortgage rates in London have fallen to the lowest levels since December 2009 according to a survey, but applications have fallen too. Average rates as declared by Countrywide fell to 4.73% from 5.33% for the same time last year. Whilst the number of applications has increased compared to May 2009, they have dropped by 8% over the last month, raising concerns over the recovery of the housing market.

Countrywide have based these figures on the activities of hundreds of consultants, and have also identified a shift between tracker and fixed rate mortgages over the last 12 months. This time last year only 3% of applications through Countrywide were for tracker mortgages. This number rose dramatically to 47% by the close of 2009, and has since fallen to 35%. It is thought that the recent change in trends is due to consumer uncertainty over political and economic change in the UK, with borrowers regarding fixed rate deals as a safer option.

Although mortgage rates in London may be at an all time low, there will be an inevitable rise over the coming year, with predictions that mortgage rates will rise by 3.5% by the end of 2011. This has the potential to cause repayment problems for Londoners that have been reaping the benefits of low interest rates over the last 15 months. According to a recent report, some homeowners have not been paying off any of the interest on their London mortgage.

This is only applicable to borrowers who initially took out a tracker mortgage when interest rates were high, and then felt the benefits of consistently lower interest rates. Some Cheltenham and Gloucester customers have in fact found themselves in a position where their tracker mortgage was actually pegged at over 1% lower than the Bank of England’s base rate of 0.5%, resulting in no interest being paid at all since March last year.

In London fixed rate mortgages have been heralded as the way ahead in light of forthcoming economic uncertainty, but after the Bank of England decided to keep the base rate at 0.5% for the 15th consecutive month, some financial experts are speculating that a tracker mortgage with a penalty free opt out scheme may be more favourable in the short term.

In a poll conducted by Reuters, a total of 61 economists hinted that they believed that the base rate would stay the same until next year, but this depends on the rate of inflation, which hit a high of 3.7% in April. This is the highest it has been for a year and a half, but monthly fluctuations might mean that overall inflation has not risen above 2%, which is the target that the Bank of England set. However, to make sure that interest and inflation remains balanced, the Organisation for Economic Cooperation and Development (OECD) stated that interest rates should be raised to 3.5% by the close of 2011.

That is a large jump in the space of 18 months, but it may well buy time for borrowers in London. Borrowers with a tracker mortgage are advised to keep their current deal and make overpayments in preparation for switching to fixed rate mortgages before interest rates escalate considerably. This will not only prepare for the inevitable higher repayments, but it will increase the amount of equity in a property making it easier to find a fixed rate mortgage with a lower interest rate.

Fixed rate mortgages have long been regarded as a less risky mortgage option, therefore as the threat of rises in interest rates draw closer it is expected that more borrowers will shun tracker mortgages for their London property. Anyone considering changing from a tracker mortgage to a fixed rate deal should consult their independent broker or high street lender for advice.

We all know that the most favourable mortgage quotes come with the biggest deposits, and that if you can’t stump up at least 40% of the total amount, interest rates will be high. In London the chance of raising a deposit of this size is more difficult than anywhere else in the country due to the high cost of properties in the capital. There are ways you can get a mortgage if you don’t have a large deposit though, and here’s how to get the mortgage quote you are looking for.

Approach an independent broker – Brokers have years of experience and can spot changing trends in the mortgage market. Many borrowers find that they can get the most competitive mortgage quotes from a broker as they are able to approach lenders and find a better bargain than when a borrower enquires directly. An independent mortgage broker can also help secure a lower interest rate when the time comes to remortgage. There are a wide variety of brokers in London that specialise in specific property markets, so if you want to purchase a high value property, you can enlist the services of a broker that specialises in that sector.

Research Government schemes – There are a few products on the market that allow borrowers to access interest free loans in return for giving up a percentage of the equity in the property. These have been designed to help buyers get on the property ladder with a minimal deposit. Depending on which scheme you are eligible for, your mortgage quote could be reduced to just 85% of the value of the property, and you may only need to find a 5% deposit. These schemes make it possible to buy back the equity at any time, or pay it off upon sale of the property.

Consider property share – Many first time buyers decide to purchase a property with other people, resulting in part ownership of a property. This has become increasingly popular in London as young professionals consider flat share to avoid commuting to the city. Getting a favourable mortgage quote for this type of purchase will require advice from specialist mortgage providers, and will slash the amount of money needed for a deposit considerably.

Industry insiders are hinting that homeowners should consider fixed rates remortgages for their London homes. This follows an announcement made by the Prime Minister last week that highlighted growing concerns over rising inflation and imminent changes in interest rates to control the impact rises may have on the economy.

As competition within the mortgage market increases, there are now some incredibly competitive fixed rate deals available that actually give variable rate mortgages a run for their money, but these may not be around for long. Mortgage advisors are therefore suggesting that Londoners remortgage soon to secure a low interest fixed rate mortgage before inflation pushed interest rates up again.

There are a couple more reasons why the time is right to choose fixed rate remortgages. One is the recent rise in house prices. With most homes in London now worth much more than they were a couple of years ago – having risen by as much as 10% over the past year – homeowners have increased their equity which means it is possible to access a lower LTV deal at a much more competitive rate than is usually associated with fixed rate.

The other reason comes with yet another announcement about the future of the country’s economy. The Organisation for Economic Cooperation and Development (OECD) warned that the Bank of England will need to increase the base rate, which is currently at an all time low of 0.5%, by December to keep inflation under control. This will of course mean that mortgage rates will rise accordingly.

Some of the best fixed rate remortgages available at the moment are for long term deals. Five year fixed rate mortgages from Britannia are now under the 4% threshold, and Nationwide has reduced interest rates on five year fixed rate deals by 0.23%. The fact that there are now 372 more five year options available than there were three years ago is also a timely reflection of the current situation.

As it is revealed that house prices are close to being level with 2007 prices, the property market is seeing the rest of the UK catch up with London. Mortgage advisors in the city have said this is due to the revival of 90% mortgages and an influx of first time buyers who can afford to take out a loan. London property prices have risen by just under 15% since this time last year, and this has in turn affected the property prices across the country.

For anyone looking to buy a house in the near future, London mortgage advisors are suggesting that borrowers make the most of the favourable mortgage deals available now by getting a short term fixed rate mortgage at a competitive rate from a mainstream lender. With the market becoming more competitive, it is possible to get unmissable deals direct from a high street bank or building society that are just as good as mortgages from an independent broker.

One of the best deals available at the moment is from the Cooperative Bank. The bank has been enjoying rising popularity recently thanks to an ethical policy that promises to invest money in ventures that do not harm the environment and actually promote ethical campaigns, as such it has also launched a mortgage product designed to benefit first time buyers in London. With London property prices being higher than anywhere else in the UK, it takes much more saving to raise sufficient deposit, and even then, the less of a deposit a borrower can put forward, the higher the interest rates on the mortgage will be.

Mortgage advisors are therefore recommending that Londoners check out the two year fixed rate mortgage with an LTV of up to 90%. This mortgage product has a fixed rate of 2.95% for two years, reverting to a standard variable rate after this term which is currently 4.24%. The advertised application fee is £999 which incorporates an £849 arrangement fee with a booking fee of £140 on top of that. Borrowers can expect to secure up to £1.5 million, which despite the continued rise in property prices, should be more than enough to purchase a property in London.

Borrowers with a bad credit history make up 14 per cent of mortgage applicants according to a recent report, and are more likely to pay a much higher interest rate than their more money savvy house-buying counterparts. However, a bad credit rating is not necessarily the fault of the borrower, and as such anyone wanting to take out a home loan should seek free mortgage advice to save money and rectify a bad borrowing reputation.

To make sure that you can access the best mortgage deals possible for your London home, speak to mortgage advisors about turning your high risk lending status in to a low risk. Advisors are currently telling borrowers that they need to prove to lenders that they are capable of managing debt. Contrary to logic, financial institutions offer the best rates to those who have existing debts rather than someone who has never had to borrow before. With a credit card or personal loan a borrower can demonstrate that they are capable of making continuous payments. It is essential that no payments have been missed to ensure you have a good credit rating.

If it transpires that you have a bad credit rating because of situations beyond your control, for example through redundancy, divorce or even applying for loans unsuccessfully, a mortgage advisor can help you better your credit rating, and even negotiate a favourable mortgage deal on your behalf. Although there are some lenders that have mortgages tailored towards those with a less than favourable credit history, the market is actually beginning to become competitive again and differences in interest rates less extreme. A good advisor will be able to overhaul your entire financial portfolio, transforming your profile from high risk to low risk.

This advice is not just for those looking to buy a home in London; free mortgage advice is available from any high street lender in the UK. However, the prices of London properties are much higher than elsewhere in the country and therefore more difficult for those with a bad financial reputation to purchase at a reasonable interest rate.

The internet is brimming with mortgage calculators that help borrowers calculate their monthly repayments, and what proportion of those payments actually pay off the loan and not just the interest. These mortgage calculators differ to some degree and finding the right one to tell you everything you need to know about your repayments can be quite a mission. If you want to be more in control of your finances, financial experts are advising mortgage holders to create their own mortgage calculators using Excel.

There are several online tutorials for creating a bespoke mortgage calculator using Excel. The tutorials show the viewer step by step how to make a fixed rate loan repayment calculator using a spreadsheet. Once you have formulated the spreadsheet you can calculate how much you are paying on principal, interest and how much money is then left on the loan. To get the monthly calculations, the first cells that need to be formatted are the total loan amount, the yearly interest rate, the term of loan in years, the monthly payment due on the loan and the monthly interest rate  because this is the frequency of the repayment.

Under this there will be five columns of calculations that show repayment amount (which will be the same for each month because it is for fixed rate mortgages), the principal amount (which you will see gradually increase over the months), the interest (which will gradually decrease over the months), the beginning loan balance and the end loan balance. The tutorial demonstrates how to format the cells in a step by step process to create a mortgage calculator that shows exactly how much you will be paying off your loan over the coming years, and it can be tailored to show how these payments could change when switching to another mortgage deal. Bespoke mortgage calculators of this description mean that as a borrower you can be more in control of your finances than ever, and know exactly how good a new mortgage deal really is before you commit to their terms.