Rates on mortgages for borrowers with deposits of 5% have started to fall this month, which will be a welcome boost for many first-time buyers.
Figures unveiled today by Moneyfacts.co.uk reveal two and five-year fixed deals at 95% loan-to-value (LTV) have ‘bucked the recent trend’ of mortgage rate rises.
Its analysis shows the average two-year fixed rate 95% LTV deal has tumbled from 4.11% at the start of May to 4.06% today. And the average for a five-year option for 95% LTV borrowers has fallen by 0.06% at the beginning of the month to 4.43%. Both rates, said Moneyfacts, have plummeted to lower levels than the same time last year.
It would appear these higher LTV products were ‘forging their own path’, said Moneyfacts. Indeed, since it was announced earlier this month that the Bank of England base rate was remaining on hold at 0.5% the rest of the products on the market have continued to rise in price.
First-time buyers
Charlotte Nelson, finance expert at Moneyfacts, said it was ‘great news’ for first-time buyers, particularly as they tend to bear the brunt of rate rises in the market.
“Competition in this sector is high particularly among lenders looking to revitalise their mortgage book by bringing new borrowers on board,” she said.
“And it is not just rates providers are using to attract these new borrowers, as an array of different incentive packages and fees means borrowers can now tailor their mortgage to suit their needs.”
Moneyfacts warned while it was good news 95% LTV rates were falling, borrowers should be aware rates on 95% LTV products were still even higher than those on 90% LTVs. Saving an extra 5% for a deposit would mean first-time buyers would be ‘significantly better off’.
Nelson added: “With rates still increasing in other sectors of the market, only time will tell how long the 95% LTV tier can continue to buck this trend.
“So, borrowers considering getting on the property ladder should look at the options now before they miss out on lower rates.”
