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Huge rise in 5% deposit mortgage availability

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Demand remains high from first-time buyers who have a wider choice of borrowing options than at the start of the year
Huge rise in 5% deposit mortgage availability

The number of 95% LTV mortgages has increased by a staggering 1262% in the six months since January 2021, said Moneysupermarket.

The price comparison site found that the number of 5% deposit mortgages has soared from 13 to 177.

Jo Thornhill, mortgages expert at Moneysupermarket, said: “This is a positive trend which is making it easier for younger buyers to get on the housing ladder. But it’s important to remember the larger the deposit you put towards your home the better, as 95% mortgages can come with risks. For example, if you buy a home with a 95% mortgage, house price uncertainty means that if you chose to sell it in the short term, you could end up in negative equity.

“If you can afford it, try to buy with as big a deposit as you can afford. It will bring your borrowing ratio down and could give you access to lower mortgage rates.”

Moneysupermarket’s research also revealed that search volumes for mortgages remained strong, despite the recent end of the full Stamp Duty holiday.

Minimal impact on demand

There was a small 5.2% fall in general mortgage searches between the final 14 days of June and the first 14 days of July, after the end of the Stamp Duty holiday. First time buyer searches dipped just 1.2% in the same period.

The average amount searched for is £213,000, while two-year fixed (40%) and five-year fixed (28%) are the most popular mortgage types for Brits.

Jo Thornhill, mortgages expert at MoneySuperMarket, said: “The stamp duty proved very popular with many homebuyers, so it’s only natural many feared its end could lead to a major dip in home buying interest.

“However, our research reveals that though there’s a been a slight fall in general and first-time buyer searches, interest in homebuying remains steady. A big factor in this is undoubtedly the new temporary stamp duty threshold of £250,000 which means that buyers who are able to complete their purchases before October can still make significant savings.”

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