However, while it’s possible to borrow up to 90% of the property’s value, the rates on these products are significantly higher than those available to people with larger deposits.
Therefore, many aspiring homeowners are saving even larger deposits.
And then, there are all the other costs involved in buying a home such as stamp duty and solicitor’s fees.
Given these entry conditions, it is not surprising that the number of first time buyers making it on to that first rung of the property ladder is low.
In May, first time buyers made up only 24% of the total number of people buying properties in the UK, according to the National Association of Estate Agents (NAEA).
President of the NAEA, Wendy Evans-Scott said: “Our members have likened the housing market to an obstacle course, with many falling at the first hurdle as the finance required to buy just isn’t available.”
Fortunately, there are various schemes, led both by the government and the banks, which aim to help cash-strapped youngsters get a foot on the housing ladder.
Just this week, for example, the government launched the FirstBuy Scheme, which is specifically designed to help those struggling to buy their first home due to the need for large deposits.
How does the new FirstBuy scheme work?
Under the terms of the scheme, more than 100 housebuilders have pledged to offer their new-build homes with 20% equity loans that, with a 5% deposit provided by the buyer, will enable them to take out a 75% mortgage through lenders such as Halifax and Nationwide Building Society.
The loans will then be repaid on resale of the property, with the Government's share available for reinvestment in more affordable housing.
The scheme, which involves household names such as Persimmon Homes and Barratt Homes, goes live in September and will aim to help more than 10,000 people, whose household income is less than £60,000, over the next two years.
Housing Minister Grant Shapps said: "With 80% of young first-time buyers depending on parental help, I am determined that we pull out all the stops to help those who want to take their first steps onto the property ladder.”
What other help is out there for first time buyers?
The FirstBuy equity loan scheme is not the only government-backed scheme for those struggling to get onto the property ladder.As long as your household income is not more than £60,000, you can also enter into a “shared ownership” agreement under which you buy a share of a property and pay rent on the remainder – until you can afford to buy it.
You can find more information about government-backed schemes on the direct.gov website
Schemes led by lenders include the recently launched Lloyds TSB Local Lend a Hand, which involves local authorities putting money in an interest-bearing savings account with the bank as security on FTB purchases made with a deposit of just 5%.
There are other shared equity schemes and mortgage products designed to help people on to the property ladder so it’s worth doing some research to find what’s available in your area.
What are the best mortgage deals?
Of course, not everyone will need a shared equity scheme to help them get on the property ladder.
So if you can raise enough of a deposit yourself what mortgages are available?
If you can manage to save a deposit of 35% of the property’s value, First Direct has a two-year tracker deal with a current pay rate of just 1.99% and a fee of £999.
For those who’d prefer a fixed rate and can muster a 25% deposit, meanwhile, Market Harborough Building Society is offering a two-year fix with a rate of 2.75% and a rather larger fee of £1,995.
If you’re unable to save that much, there are 90% mortgages available although you will pay a higher rate of interest.
Yorkshire Building Society, has a two-year fix at 4.79% and a three-year fix at 5.29%, both with a £995 fee.
What about saving for that all important deposit?
There are some savings products specifically aimed at aspiring first time buyers.
Clydesdale and Yorkshire Banks, for example (which are both part of the same group) recently launched an FTB savings account called the Regular Home Saver that offers up to £1,000 cashback for those who use the cash saved to take out a Clydesdale or Yorkshire Bank mortgage.
However, the terms are quite stringent as you must save at least £200 a month and there is no guarantee the Yorkshire or Clydesdale’s mortgages will be that competitive when you do come to buy.
What’s more you earn just 0.50% interest.
Other accounts aimed specifically at first time buyers include Santander's First Home Saver, which is currently paying 5.00% (variable).
To qualify you have to make an initial deposit of between £1,000 and £5,000 and top this up with monthly payments of between £100 and £300 to avoid being penalised.
You can access your cash instantly at any time, but you must withdraw the whole amount and close the account to do so.
You don’t have to go for an account specifically aimed at first time buyers though.
Another option is to go for a standard regular saver account such as Northern Rock’s, which pays 4.00% as long as you pay in between £1 and £250 a month for the one-year term.
If you are yet to use your ISA allowance, you can also get tax-free returns of 3.00% with the Halifax Direct Reward ISA, for example, which can be opened with just £1.
And if you have a Halifax current account, you’ll receive a rate of 3.20%.
The terms of this account are more flexible than those on regular savers as you can pay money in whenever you want. However, the maximum you can save into a cash ISA this tax year is £5,340.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.