The average two-year fixed rate for those with just a 5% deposit has fallen by 0.02 percentage points to 3.15% in the last month, according to Moneyfacts.

The financial information provider found that borrowers with 10% upfront have also seen falling rates – down by 0.04 percentage points to 2.66% since November.

The lowdown on loan-to-value

These ‘high loan-to-value’ deals, where the customer needs to borrow a high proportion of the property’s value as they have a small deposit, are often required by first-time buyers – so this is good news for them.

The products are charged at a premium compared to mortgages where the borrower can put down a substantial deposit, because they carry a greater risk of negative equity. And, while the rates have come down over the last month, they are still more expensive than mortgages where the borrower has 40% of the property’s value as an upfront payment, for example.

Long-term rates down

The average five-year fixed rate at higher borrowing levels have also fallen during November, with the maximum 95% LTV decreasing by 0.03% from 3.60% to 3.57%, and the average rate at 90% LTV decreasing by 0.02% from 2.96% to 2.94%.

Darren Cook, finance expert at Moneyfacts, said: “First-time buyers or those borrowers seeking higher LTVs seem to have benefitted the most during November, as providers appear to be once again competing for this business by driving interest rates down.

“During the latest round of competitive cuts, it appears that mortgage providers are lowering rates for those with a smaller deposit, with the average rates at 90% and 95% seeing greater reductions than their lower LTV counterparts.”