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Rates fall on 5% deposit mortgages, as competition hots up

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A rise in product numbers has pushed prices down for those who want to borrow 95% of the property's value
Rates fall on 5% deposit mortgages, as competition hots up

There are 405 mortgage products available to borrowers with just a 5% deposit – known as 95% loan-to-value (LTV) mortgages, said Moneyfacts.

The financial information provider added that this is the highest number in any month since May 2019, and the increase in competition has pushed down interest rates.

Cheaper deals

Today, the average rates available on two and five-year fixed rate mortgage at 95% loan-to-value (LTV) stand at 3.22% and 3.52% respectively.

When comparing these to the rates available to those with 5% upfront a year ago, the average rate offered on a two-year deal has decreased by 0.19%, while five-year rates have dropped 0.26%.

Since 2015, the fall in the cost of these mortgages has been even more significant. Two-year fixed rates for those with a 5% deposit were 5.04% while five-year deals were 5.27%.

Eleanor Williams, finance expert at Moneyfacts, said: “The rates available now are much lower than they were two or even five years ago when the average 95% LTV mortgage was priced at over 5% for both sectors – good news for prospective borrowers.

“Although last year’s economic uncertainty may have put some borrowers off taking out their first mortgage, or indeed tying themselves to a new deal, it seems that lenders are now actively competing to attract these customers, regardless of whether they are a first-time buyer or are looking to remortgage with a low level of equity.

“As with any financial commitment, it is vital that borrowers take into account the overall true cost of any deal and make sure that what they are committing to will be affordable over the long-term. Particularly with higher LTV products, talking with an independent financial adviser about the option to make overpayments in line with the lender’s boundaries may be a sensible precaution, and ensure they have an even wider pool of products available to them in the future.”

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