Deposit 'does not change property cost'

Date:Thursday 26th February 2009
Author: Max Freedman

Deposit sizes do not alter the overall cost of buying a home, it has been claimed.

Selwyn Lim, director of online mortgage and property information source Mouseprice, was speaking after research by Abbey showed that first-time buyers with a 25 per cent deposit would be better off buying than renting in terms of financial savings.

Mr Lim refuted this, saying that it is not cheaper to pay a mortgage rather than rent and pointed out the "opportunity cost of the capital".

"There is still a cost in terms of interest on the cash and also the risk that you are taking on," he said, adding that deposit size makes "no difference" if the mortgage rate is the same whatever the deposit value.

Recent figures from show that 21 per cent of mortgage holders in the UK had a loan-to-value of at least 90 per cent.

On average, the loan-to-value ratio that people were borrowing was 64 per cent.