First-time buyers in London could save more than £1,000 a year on mortgage payments if hints of a further reduction in the Bank Of England Base rate come to fruition.

Research by Hamptons International found borrowers would save up to £518 a year if the cut already made this summer was passed on in full to customers in the capital.

Its recently released Ability To Buy survey showed transferring that 0.25% cut would bring the mortgage rate down to 2.2% on the average first-time buyer loan of £159,381, cutting annual payments by 3%.

It said a further, rumoured, reduction would see buyers even better off annually with a saving of £1,028 annually assuming the banks pass on the cut.

Hamptons director of residential research Fionnuala Earley said: “The Bank Of England’s rate cut and, more importantly, its new Term Funding Scheme, which incentivises banks to pass on the cuts and lend, should brighten the financial outlook for new homeowners.

“Hints that there could be another cut could be a bonus for new buyers. If the hint becomes a reality, new buyers nationally could see their mortgage bill reduced by almost £500 a year and £1,000 for those in the capital.

“While the rate cut does little for those still saving for their first home, there is some respite as the rate of house price growth is slowing and prices are expected to fall slightly in 2017.

“Providing incomes continue to rise, their ability to save will improve, meaning the dream of a new home could become a reality a little sooner.”

The study showed that the lower mortgage rates would cushion the effect of rising inflation on essentials including food, transport and utilities caused by the fall in Sterling.

Hamptons research found deposits remained the biggest hurdle for new buyers in the UK.

However, the situation had improved as the time for an average young couple to save a deposit for their first home fell to five and a half years in the second quarter of 2016.

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