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Competition drives falls in mortgage rates for those with small deposits

Written by: John Fitzsimons
It's good news for first-time buyers who are benefitting from the fall in costs
Competition drives falls in mortgage rates for those with small deposits

The interest rates charged on mortgages available at high loan-to-values (LTV) have dropped significantly over the last 12 months.

That’s according to new data from Moneyfacts, which found that average interest rates on two-year fixed rates at 95 per cent LTV have fallen from 3.46 per cent last January to 3.24 per cent today, a drop of 0.22 percentage points.

Rates on 90 per cent deals dropped by 0.1 percentage points, while for all two-year deals the fall was more modest at 0.08 percentage points.

On five-year deals, products at the 95 per cent band saw average interest rates drop to an average of 3.55 per cent from 3.86 per cent a year ago, a fall of 0.31 percentage points.

By comparison, 90 per cent deals saw rates fall 0.22 percentage points, while rates across all LTV bands dropped by an average of 0.21 percentage points.

And the difference is at its most stark on ten-year deals, where the average rate charged on a 95 per cent LTV deal dropped from 5.05 per cent last January to 4.09 per cent today, a fall of 0.96 percentage points.

On 90 per cent deals the average rate dropped 0.73 percentage points, while across all bands the fall was just 0.27 percentage points.

Darren Cook, spokesperson for Moneyfacts, said the falls in rates on small deposit mortgages was “fantastic news” for would-be first-time buyers who have been planning and saving in order to get onto the housing ladder this year.

“There has been a concerted drive by mortgage providers during 2019 to try and secure the business of potential first-time buyers, who are the lifeblood of the mortgage and property markets, and it is encouraging to see rates decrease as a result of some healthy competition,” he continued.

“Despite this increase in competition at higher risk LTV tiers, after the financial crisis the Financial Conduct Authority introduced clear affordability measures that mortgage providers must follow, so potential first-time buyers will still need to jump through several affordability hoops before they will find themselves on the first rung of the property ladder.”

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