With this purchase, the first-time buyers mortgage can allow you to save a tremendous amount of money on the purchase of your new home. Unfortunately, depending on the market, it can be more expensive than simply waiting for a better home to come available. With some of the premiums and interest rates that are currently on the market, even the first-time buyers mortgage is not as attractive as it might seem.

Most experts would agree that this is an incentive for first-time buyers mortgage is to save up as much as possible and put down as large a down payment as they can in order to reduce the cost of the home over time.

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‘Even at 90 per cent, the number of loans are limited and you will have to pay a premium on the rate,’ says Melanie Bien of Savills Private Finance.

‘First-time buyers will increasingly have to return to old-fashioned values and save up for a deposit. Unlike in the past, where the danger of saving was that you would be priced further off the housing ladder, the situation has changed; with prices falling, you could argue that there is more reason than ever to hold off to ensure you don’t pay more than you need to.’

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Miles Shipside, commercial director of Rightmove, said: “Whilst those who do not have to sell are holding off, sellers who are also looking to buy are strongly placed to negotiate an equal or larger reduction in the price of the property they are buying.

“In addition, buyers currently benefit from the best choice in years. For example, properties that are architecturally desirable or in tight school catchment areas are increasingly attainable. Buyers with specific requirements should take a long-term view to try and secure their dream home.”

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“Rates have fallen but they are still very restrictive given the current macro-economic backdrop,” said Lena Komileva, a market economist at Tullet Prebon.

Alan Clarke of BNP Paribas commented,  “This is the first bit of helpful news for a while but it comes on the back of a sizeable upward shift the prior month, so rates are still higher than two months ago. If reports are correct that potential buyers are sitting on their hands in anticipation of possible stamp duty freezes, then to some extent it is academic what the cost of a two-year fixed rate is — new buyers are holding fire.”

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“This is a great deal for first time buyers,” Mike Bottomley, national new build manager for Halifax, stated. “By opening a new Halifax account and saving regularly, potential home owners are planning for the financial commitment of buying their first home. Doubling their deposit in this way should be a major incentive for first time buyers.”

Andy Fell, Director of Branch Mortgages at the Bank, said “In these uncertain times, we are committed to helping borrowers who are looking for either their first mortgage or a new competitive deal. We are giving practical support by providing lower rates on all our fixed and tracker mortgages and at the same time.

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“The credit crunch has buried any chances most first time buyers might have had of getting on the property ladder,” said managing director of Your Move estate agents, David Newnes.

“Mortgage finance hasn’t been this hard to come by for fifteen years – but for landlords this is a cloud with a gold-plated lining.”

“There has been a stellar rise in the number of people looking to rent since the credit crunch began to kick in,” added Mr Newnes.

“The criteria banks and building societies use for deciding how much you can borrow have got a lot tougher. People who would have fallen into the first time buyer bracket a year ago are now renting.”

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“The package being announced today will both help people facing difficulties right now, and lay the foundations to help meet the long term housing needs of the country,” said Caroline Flint, the Housing Minister.

Shadow housing minister, Grant Shapps stated, “This government must think the public are fools,” he said. “Having massively increased the costs of buying and selling a house by increasing the stamp duty take by 10 times and introducing pointless red tape like home information packs (Hips), ministers now want us to believe that they’re on our side. If they were really serious about helping people get on the housing ladder then they would scrap stamp duty for nine out of 10 first-time buyers and abolish Hips. Until they do this no one will be taken in by their latest daily gimmick.”

“There is clearly a lot to be said for peace of mind when it comes to financial products, after all, the King of mortgage protection - the fixed rate - is as popular as ever. Yet it is because of the relatively high prices of fixed rates at the moment that this product may well find some homes up and down the country. The product would be best compared to a capped rate mortgage, but unfortunately we find ourselves with no capped rates currently available. The decision therefore rests on what your view on the future of interest rates is,” says Drew Wotherspoon of Charcol.co.uk.

“If you believe rates are going to rocket up in the foreseeable future then there will clearly be some merit in taking this product or a fixed rate, but they really would have to go up by well over 1% in 2 years for there to be value. I do not believe that this is the future direction for rates, quite the opposite in fact.”

Ann Robinson, Director of Consumer Policy at uSwitch.com, comments: “This is a real catch-22 for consumers who are struggling to find the funds to pay mortgage set-up costs. In fact, by allowing consumers to add fees onto the mortgage, it could be argued that providers are doing them a good turn. This is particularly true for first time buyers where it could mean the difference between getting on the property ladder or not.

“However, adding fees to a mortgage means that you will be spreading the amount over many years and paying interest for the pleasure of doing so - this is an extremely expensive option and should always be seen as a last resort. If you can in any way manage to pay the fee upfront this will always be your best option. Otherwise buyers should make sure that they make regular overpayments to minimise the impact of high interest costs - as they could end up doubling the original cost of an arrangement fee.”

Those seeking a first time buyer mortgage are finding it increasingly difficult to find a bank willing to work with them. Rates are going up and even though housing prices are down, approvals for first time buyer mortgages are as well. One of the main problems affecting the first time buyer mortgage market is the fact that LTV ratios are dropping, which means higher down payments will be necessary. Home buyers that need a first time buyer mortgage are being encouraged to start saving now before they apply.

Rachel Thrussell, Head of Savings at Moneyfacts.co.uk, said: “Savers are one of the few groups to have benefited from the credit crunch, with rates at some of the highest levels that we have seen in recent years.

“With rates on fixed-rate bonds continuing to increase for the first time in many years, we have seen all of the top six Moneyfacts.co.uk best buy places being taken up by rates of over 7%. Fixed-rate investments are not suitable for everyone, but for anyone who doesn’t need access to their money for a period of between six months and five years, then rates as high as 7.10% can be found.”