HOMEBUYERS looking forward to a helping hand from the Government under the new shared-equity scheme should not hold their breath.

The details of the scheme, which would give first-time buyers a deposit in the form of a loan from the Government and mortgage lenders, have not been finalised, despite the many announcements from the Office of the Deputy Prime Minister and the Treasury. The scheme is not set to start until next April and, although participants will not be means-tested, the programme will not be open to all.

Sue Anderson, of the Council of Mortgage Lenders, says: “This is a modest scheme and it is aimed at first-time buyers who, ordinarily, would be able to enter the housing market but find themselves excluded because of high house prices. Those who can manage to buy now should do so.”

But those looking for their first home should not be too downhearted. The cost of a home loan is continuing to fall as mortgage lenders trim their rates in line with falling swap rates — the money markets which determine the pricing of fixed-rate loan deals.

Swap rates began to tumble a fortnight ago after Mervyn King, the Governor of the Bank of England, indicated that there might be a base rate cut next month.

There are fears, however, that the downward trend may not continue for long. After a report issued this week by the Organisation for Economic Co-operation and Development, the international think-tank, some economists say that interest rates may start to rise in the next year or two.

Two weeks ago, the best-buy mortgage rate on a two-year fixed-rate deal was about 4.9 per cent, but borrowers can now choose from deals pegged as low as 4.39 per cent.

Portman Building Society charges 4.39 per cent on its two-year fixed rate deal, while Newcastle Building Society charges 4.49 per cent interest on its two-year fix.

Lenders are tussling among themselves for a spot in the best-buy league for mortgages. Not content with cutting the rate on its two-year fix from 4.89 per cent to 4.69 per cent at the beginning of the week, Alliance & Leicester later decreased its rate again to 4.64 per cent.

The UK’s biggest lenders also joined the fray. Nationwide, the UK’s third biggest lender, cut the rate on its two-year deal from 4.95 per cent to 4.69 per cent. Abbey, the second-biggest lender also cut the rates on all its mortgages. Borrowers with a 25 per cent deposit can secure a two-year fix pegged at 4.89 per cent. Those who wish to borrow up to 95 per cent of the value of their property will pay 4.99 per cent.

Ray Boulger, of Charcol, the mortgage broker, says Nationwide’s deal has some attractive perks. He says: “Nationwide’s two-year fixed-rate loan is flexible, so borrowers can overpay if they wish. The deal also comes with free valuation and legals for those who are remortgaging their home.”

Not all mortgages should be chosen solely because of the perks, however. First-time buyers who take out a mortgage with the Woolwich, the mortgage arm of Barclays Bank, will receive discount vouchers for home furniture and a free pizza when they move.

But buyers have to balance the merits of a quattro stagione pizza against a slightly higher two-year rate pegged at 4.99 per cent.

However, Abbey’s two-year mortgage deal includes some small print which helps its cause. Borrowers who opt for the 4.99 per cent deal and borrow up to 60 per cent of the value of their property are not locked into the deal. Mr Boulger says: “Abbey has no early redemption charges on this loan. This means borrowers can leave the deal at any stage without being forced to pay a penalty.”

This type of deal could be ideal for borrowers who want to wait and see what will happen to interest rates before locking in to a fixed-rate loan. “The slightly higher interest rate is a small premium to pay for this flexibility,” Mr Boulger says.

Borrowers who want to take advantage of any future falls in the base rate can choose a discount or tracker deal, which will rise and fall in line with the base rate.

First-time buyers struggling to come up with a deposit to put on their home can take out a 100 per cent tracker mortgage with First Active. The tracker loan is pegged at the base rate, giving it a current pay rate of 4.75 per cent. First Active does apply a higher lending charge (HLC) for loans of more than 90 per cent of the value of a property, but its HLC is 1 per cent of the loan, lower than the typical HLC of 3 per cent.

Homebuyers who have a 20 per cent deposit can choose a loan with a lower rate.

Lambeth Building Society has a two-year discounted mortgage pegged at 2.45 per cent below its standard variable rate, giving it a pay rate of 4.49 per cent. Buyers can borrow up to £500,000 under the terms of the deal.

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