Mortgage rate and house price rises are keeping first-time buyers out of the market.

New figures from the Council of Mortgage Lenders show the value of lending to first-timers in July was down 4 per cent on a month before, at £4.4 billion.

And, at 32,400, the number of first-time buyer loans was an even more worrying 12 per cent lower than a year ago.

That’s not to say there aren’t ways for cash-strapped first-timers to get a toehold in the market.

Of course, some are riskier than others.

According to the CML, the average first-timer is borrowing 3.39 times their income.

Many lenders will now go as far as four-times income, and some will lend five or six.

But borrowing at that level makes buyers hostages to fortune.

Job loss, ill health, further rate rises or falling property prices could quickly transform what looked like a minor financial gamble into a catastrophe.

A significant proportion of first-timers are going for interest-only loans in the belief that this will keep their costs at an affordable level.

But this is an equally dangerous and, ultimately, costly course of action.

There are less risky ways to make buying affordable, though.

A loan or mortgage guarantee from parents, pooling resources with a friend or taking advantage of one of the Government’s low-cost HomeBuy schemes can all help turn the dream of property ownership into reality.

Mortgage lenders say they want our business, but many of them make their loans so complicated it can be well nigh impossible to choose between them.

The range of interest rates, fees, terms and conditions they offer can seem utterly mystifying.

Abbey currently has 89 different mortgages, Scottish Widows 97, C&G 101 and Standard Life an incredible 219, according to financial information provider Moneyfacts.co.uk.

Julia Harris, the site’s mortgage expert, says: “The number of mortgage products offered by some lenders is more than enough to baffle the average man on the street.”

To work out the true cost of each deal, as well as the rates and fees, you have to factor in the associated valuation and legal costs.

And if you need to borrow 90 per cent or more of your property’s valuation, you are also likely to face a higher lending charge.

The answer, of course, is to do your homework.

The more research you do, the less daunting the mortgage choice will become.

Spend a few hours on the internet reading…

Then enlist the help of an independent mortgage adviser…

And you’ll be well on your way to finding the right deal for your needs.

The most popular reasons for signing up to equity release plans are funding home improvements and treats such as exotic holidays.

The next most frequent motives are the need to pay for a divorce or buy out an ex-partner, according to new research from financial services firm Saga.

Equity release, which allows the over 60s to access the cash tied up in their homes, is becoming increasingly popular.

But whatever the reason for taking out a plan, it is not something that should be done lightly.

This type of loan should always be considered as a last resort, when all other options have been ruled out.

Yes, it allows you to get hold of cash at a time when you need it…

And it may seem very appealing because there are no repayments to be made until you sell up or die.

But that doesn’t mean equity release is good value.

In fact, the costs are far higher than most people realise.

Depending on the plan you choose, you’ll be charged interest, which rolls up – incurring interest on the interest – until it is repaid.

The other possibility is that you – or your heirs – will be expected to hand over a sizeable percentage of your home’s eventual sale price.

Either way, you, or they, can expect to repay several times more than you originally borrowed.

So before you opt for equity release, think hard about what you want the money for – and whether it really is worth it.

Homeowners are becoming increasingly nervous about the Bank of England’s monthly interest rate decisions.

There have been five rate rises in the past 12 months, and the latest rate-setting meeting takes place next week.

For many people, another hike could be the last straw.

As a result, four out of ten borrowers now get anxious in the run up to the Bank’s meetings, says Intelligent Finance.

The traditional way to protect yourself from this kind of worry is to take a fixed-rate loan.

But, as the internet bank and mortgage lender points out, another solution is to transfer to an offset mortgage.

As the name suggests, these offset your savings against your debt – saving thousands of pounds of interest over the mortgage term, and allowing you to clear your debt years early.

IF’s managing director Mark Parker says: “With interest rates on the rise and purse-strings tightening, it’s important to make every penny work as hard as possible.

“Offset mortgages give peace of mind, negating the effects of a rate hike and giving the flexibility to lower monthly payments.”

Offsets don’t work for everyone though, and if you don’t have a large savings pot, they can actually leave you worse off than a traditional mortgage deal.

So make sure you do your sums before signing up for one of these loans.

And now some more (tentative) good news for house hunters and mortgage seekers…

In its August house price index, online estate agent Rightmove reports that London property asking prices have fallen for the first time in a year.

It reckons this trend could spread, bringing down house price increases to about the same rate as wage inflation – in other words, around 3 to 4 per cent.

This may seem depressing if you have a home to sell.

But if you’re a first-time buyer, trying to get that tricky initial foothold on the property ladder, it could be cause for celebration.

In fact, it could be something for all borrowers to shout about.

As Rightmove points out: “This… leads to the conclusion that the pressure on the Bank of England to raise interest rates again is reducing significantly.”

Fingers crossed…

The other day, in Britons struggling with debt repayments, I said there might be a chink of light amid all the financial gloom.

But I spoke too soon as far as anyone with a troubled credit history is concerned.

The recent global stock market falls were sparked by US lenders getting in a mess over what are known as “sub-prime” or impaired credit loans.

Basically, they lent too much money to too many people who, it turned out, weren’t able to pay it back.

Now, here in the UK, lenders are getting the jitters about these mortgages.

Northern Rock has priced itself out of this sector of the market by raising interest rates by up to 1.25 per cent and ditching base rate tracker loans for borrowers with poor credit records.

Specialist impaired credit mortgage lender GMAC-RFC has also lifted its rates, and it looks as if other sub-prime lenders will follow their example.

This doesn’t mean you won’t be able to get a mortgage if you have a chequered financial history, but it does mean it’s going to be harder to find a good deal.

Because of this, it’s more important than ever to shop around – and to borrow responsibly.

If you’ve had credit problems in the past, it’s crucial not to over-extend yourself.

Stick with a debt you can comfortably afford…

Be financially disciplined so you can keep up the repayments…

And hopefully, before long, your troubles will be a thing of the past.

Following on from last week’s post about the 51 different charges that mortgage lenders can slap on unsuspecting borrowers…

I’ve had an email from an eagle-eyed mortgage seeker pointing out that the fees themselves are only part of the problem – the way lenders charge them is frequently designed to fleece us still further.

He writes: “If there are arrangement fees to pay at the beginning of the mortgage, often lenders offer to (or automatically) add these onto the amount borrowed.

“The fees can often be in excess of £1,000 and when borrowed at 5.75 per cent, for instance, over 25 years this can add quite an amount to the cost.”

He’s absolutely right.

If you’re trying to keep expenses down, it can be very tempting to let your lender add its loan arrangement or set-up fee to what you owe.

But once you realise how much this will cost over the long term, you might not be so happy.

Taking his example, a £1,000 fee paid off over 25 years at 5.75 per cent annual interest would actually cost £1,887 – almost double the original amount.

My correspondent asks: “Would it be better to save up or borrow with a short-term loan to cover the fees and some expenses, to save in the long run?”

It certainly would be better to cover these costs up front from savings or, if you can’t manage that, to pay with a low-cost, short-term personal loan.

Mortgage lenders make enough money out of us already – there’s no need to hand them more.

A record number of households are having serious difficulty keeping up with debt repayments, according to the Daily Telegraph.

And no wonder – between us, the paper says, we owe more money than the UK’s entire economy generates in a year.

Add together outstanding mortgages, loan, credit card and higher purchase balances plus other forms of debt and it comes to a whopping £1,345 billion.

Meanwhile, our annual economic output stands at just £1,330 billion.

Apparently, we owe more per head in relation to our income than the Americans, Japanese or Germans.

So it’s no surprise to learn that around 2.5 million people describe themselves as “very concerned” about their ability to manage their debts.

Frankly, I’m amazed that figure isn’t a lot higher.

But there may be a chink of light amid all this gloom.

Mortgage company mform.co.uk says the rates at which mortgage lenders borrow in the money markets to support their fixed-rate deals fell last week, and it thinks this could be the beginning of a new downward trend.

The Nationwide and West Bromwich building societies have now reduced their rates on some fixed-interest deals.

Fingers crossed the desire not to be left looking uncompetitive will encourage other lenders to follow their example.

Financial institutions are finding ever more ways to part us from our cash.

Price comparison site Moneysupermarket.com warns: “Brits face running a gauntlet of 112 charges across just five financial products – mortgage, current account, savings product, loan and credit card.”

The site’s managing director Stuart Glendinning adds: “It is unbelievable that five financial products can be the root of so much penalty pain.

“With so many default fees and charges in place, even the most astute consumer can fall foul.”

Mortgages are the worst offenders with a possible 51 different penalty charges, while current accounts have up to 27, credit cards have 19, loans 11 and savings accounts four.

That’s why it’s essential – particularly with mortgages where there are so many ways to get caught out – that you read every word of the small print before you sign on the dotted line.

Interest-only mortgages could turn out be a ticking timebomb for many people.

So says financial comparison site Moneynet.co.uk, and I’d have to agree.

They make up almost a third of all new mortgages and, with interest rates and house prices continuing to climb, it’s hard not to conclude that many people are choosing them because they are – initially at least – considerably cheaper than repayment loans.

This is very worrying.

Not only are interest-only mortgages actually much more expensive in the long run, there is also the far from insignificant issue of the repayment vehicle.

Most lenders no longer insist on seeing proof that borrowers have organised an investment to repay the capital debt before granting an interest-only loan.

Because of this, it’s highly likely many won’t bother to set one up.

After all, if they had the spare cash to pay into an investment plan as well as a mortgage every month, why would they want this kind of home loan?

Anyone with an ounce of sense would just put the money straight into a repayment mortgage.

Repayment loans are much cheaper over the long term, and there’s no need to worry about investment returns and whether there will be enough cash at the end to clear the debt.

Interest-only loans are costly and risky, and should definitely be stamped ‘handle with care’.