There’s good news for first-time buyers with small deposits as mortgage interest rates in this market have plummeted to a record low while choices have widened.
Data released today has revealed two-year fixed-rate deals for borrowers with 5% deposits who therefore need a 95% loan-to-value (LTV) mortgage are averaging at 3.54% – a sharp decline on the 6.52% typical rate 10 years ago.
Meanwhile, homebuyers with a 10% deposit, who require a loan of 90% of their property’s value, are benefiting from having the pick of the fixed-rate bunch.
According to Moneyfacts.co.uk, which has compiled the data, the number of fixed-rate deals for these borrowers is at its highest on record with more than 650 deals available, compared to just over 100 in December 2008.
Interest rates on 90% LTV mortgages have also plunged from 6.5% in 2008 to 2.7% today.
Lifeblood of the market
Darren Cook, finance expert at Moneyfacts, said: “With first-time buyers being the lifeblood of the housing and mortgage market, it is encouraging to see that potential new homeowners now have a greater number of mortgage options available at the higher LTV tiers, as well as lower initial interest rates in the two-year fixed sector, to choose from.”
Meanwhile, for borrowers who have larger deposits it’s a different story. Moneyfacts’ data shows the average two-year fixed mortgage rate for borrowers who need a 60% LTV have gone up by 0.12% year-on-year. Even those borrowing 85%, who have 15% deposits, have seen rates rise by 0.21%.
Cook thinks the reason for this is because lenders are keen to grab the attention of first-time buyers and are entering into some ‘healthy competition’ in their bid for this market.
For the first-time buyers, the advice is to ensure they scour the market for the best deal.
Cook added: “Prospective first-time buyers should start to consider their options and make a comparison of mortgage products that may best suit their requirements, as choosing a good deal could save sums in the long run.
