Some money is still needed upfront

First-time buyers will be cheering the news that 100 per cent mortgages are now available on a widespread basis, not just to restricted categories of professionals.

Up to now, the only other way to avoid saving an 8 per cent deposit was to get your name on local authorities' affordable housing lists: under some schemes it is possible to borrow 97 per cent of a discounted property price and, in April, Bank of Ireland became the first lender to process these loans.

Under the 100 per cent loan, borrowers will still need money upfront for booking deposits, which can be recovered later. Significant costs like furniture, legal fees and stamp duty cannot be borrowed under the loan.

First Active is neither the most restrictive nor aggressive lender in terms of the amount it will advance.

Repayments must not exceed 40 per cent of net disposable income; at other lenders, this percentage varies from 35 per cent to 45 per cent. (The old guidelines based on multiples of salary are more or less extinct.)

First Active, which is part of the Royal Bank of Scotland group, has been targeting first-time buyers for some time, most recently by echoing Ulster Bank's decision to offer loans over 40 years.

However, the lender is limiting its 100 per cent loan to a period of 30 years to allow buyers to build equity early on.

Terms of 30 and 40 years will nevertheless sound horrendously long to an older generation of buyers, for whom 15 and 20 years were the norm. The average mortgage term, according to figures from IIB Homeloans and the Economic and Social Research Institute, is now 22 years.

First Active's 100 per cent loan is predicted to ease the pressure on parents, a growing number of whom have made financial gifts to their children to help get them escape the rental sector, often by borrowing against the value of their own homes.

Opinion is divided as to whether other lenders will rush to copy First Active's move.