While first-time buyers are faced with many challenges getting onto the property ladder, they are receiving a helping hand with a number of products aimed at those with smaller deposits.
Mortgages rates in general have been increasing, even though the base rate remained stationary, but for borrowers looking for a 95% mortgage on a two or five-year fixed rate they have begun falling.
Moneyfacts.co.uk figures have revealed that two or five-year fixed-rate mortgages at 95% loan-to-value (LTV) have ‘bucked the trend’. The average two-year fixed rate has fallen to 4.06% from 4.11% at the start of May, and the five-year fixed rate has dropped 0.06% to 4.43%. Both rates are now lower than they were this time last year.
The bigger the deposit, the better the savings
This fall in rates can probably be attributed to lenders actively targeting new borrowers to revitalise their mortgage book. According to Charlotte Nelson, finance expert at moneyfacts.co.uk: “Competition in this sector is high particularly among lenders looking to revitalise their mortgage book by bringing new borrowers on board, and it is not just rates providers are using to attract these new borrowers, as an array of different incentive packages and fees means borrowers can now tailor their mortgage to suit their needs.”
However, borrowers that can stretch to a 10% deposit will find that mortgage rates for a 90% LTV are even lower and saving the extra 5% deposit would make them significantly better off. In fact, borrowers could save as much as £141.82 per month, based on a £200,000 loan over 25 years when comparing the average two-year fixed rate at 90% LTV of 2.74% to the average 95% LTV equivalent.
There is no indication that rates will rise imminently, but there are no guarantees that the downward trend will continue. Borrowers considering getting on the property ladder should look at the options now while there are still choices available for good deals and low rates.