Despite the base rate increase to 0.75% less than a month ago, lenders keen on attracting first-time buyers are continuing to slice away at their rates.

For borrowers with just a 5% deposit, the market is offering a range of competitive deals. With first-time buyers facing an average purchase price of £208,741, decreasing rates on a 95% loan-to-value (LTV) could make a big difference.

Fixed rates lower than last year

According to, the average five-year fixed rate with a 5% deposit is now 4.30%, compared with 4.51% a year ago. Some lenders are making even bigger cuts to stand out from the crowd; Sainsbury’s Bank currently has a five-year fixed rate at a low 3.29%, with £500 cashback.

Last year, two-year fixes were sitting at 4.18%, but are now averaging 3.95%, and again with some lenders making further reductions. Nottingham Building Society’s cheapest fixed-rate is 2.99% with a £999 fee, and Yorkshire Building Society currently has a deal at 2.87% with a £495 fee.

Mainstream lenders continue the trend

During August, Nationwide, HSBC, M&S Bank and Barclays all announced lower rates for 95% LTV borrowing. Barclays is offering a five-year fix at 95% LTV at a rate of 4.04% with a product fee of £499, as well as an option with no fee at a rate of 4.14%.

M&S Bank extended its LTV on three new products, two and five-year fixed rates plus a two-year tracker mortgage and are offering £1,000 cashback to first-home buyers. HSBC UK refreshed its mortgage range by reducing its 95% LTV three and five-year fixed rates by 0.30% to 3.44% and 3.59% respectively, both with no fee, and its 95% LTV two-year fix by 0.15% to 3.34% with no fee. Nationwide reduced its two-year fixed rates by 0.40% to start at 3.24% with a £999 fee and 3.64% with no fee. 95% LTV five-year fixed rates now start at 4.14% with a £999 fee and 4.34% fee-free.

Lenders offering 95% LTV mortgage deals at increasingly competitive rates will fuel the first-time market even further, as the availability of low rates continues to make buying more financially attractive than renting the number of first-time buyers will continue to grow.