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Limited choice for low deposit borrowers

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A two-tier market has seen costs fall for lower risk borrowers, but rise for those who need to borrow at least 90% of a property's value
Limited choice for low deposit borrowers

Product choice in the mortgage market has dropped again, according to Moneyfacts, with 82 fewer deals available at the start of this month compared to the beginning of June.

The financial information provider said the hardest hit borrowers are those with the smallest deposits as a portion of the property price. At the start of July there were only 16 two-year fixed rate mortgages available at 90% of the property’s value and 26 five-year fixed rate deals.

At 95% of the property’s value, only six fixed rates were available.

Lower rates

The good news for some borrowers is that mortgage rates have fallen further over the last month, with two-year fixed rate hitting 1.99% and five-year fixed mortgages down to 2.25% – the lowest levels since 2007.

But these figures don’t tell the whole story.

For borrowers with a small deposit of five or 10 per cent, mortgage rates have actually increased in the last month.

Moneyfacts found that the two-year fixed average rate at 90% LTV has risen 0.60% month-on-month to 2.90%, and 0.66% to 3.94% at 95% LTV.

Eleanor Williams, finance expert at Moneyfacts, said: ” There remains a dearth of available products. After a minor rally last month, July saw overall product choice fall again, starting the month with 2,728 products on offer. March began with 779 products available at 90% LTV, which had dropped by 91% to 70 products on offer at the start of July – a record low based on our Treasury report data, beating the previous low of 71 products in May 2009.

“We are left with a very mixed picture for potential new mortgage customers. Those with higher levels of deposit or equity are seeing continued reductions in the average rates available and the prospect of saving potentially thousands on stamp duty will be a fantastic incentive to progress any home moves.

“However, for those with only 5% or 10% deposit or equity, the outlook remains bleak.”

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