Borrowers with low deposits are benefiting from ‘dramatic’ rate cuts which have sent interest on mortgages tumbling to the lowest levels this year.
Homebuyers or remortgagers with deposits or equity of 10% or 5% may not be able to benefit from the ‘below-1%’ mortgages for those with higher equity, but they can still profit from the fierce rate war which is ensuing, according to the latest analysis from Moneyfacts.co.uk.
The data shows the average two-year fixed rate mortgage for borrowers who required loans for 90% of their property’s value have plunged by 0.29% to 2.56% in the last month.
Meanwhile, those looking for a 95% loan could take advantage of rates which had been cut by an average of 0.25%.
Even those locking in for the longer five-year deals were, on average, paying much less this month than last.
And while many buyers prefer the flexibility afforded by the shorter deals, Eleanor Williams, finance expert at Moneyfacts.co.uk, said a five-year option may prove attractive in the current economic environment.
She explained: “First-time buyers may still prefer to lock into five-year fixed rate deal, especially with murmurings of an interest rate rise on the horizon.
“Should base rate increase, those borrowers who are on a variable rate mortgage such as their lender’s standard variable rate (SVR) would be at risk of seeing their monthly repayments rise, therefore the benefit of fixing to a new deal and securing a stable rate and payment are clear for many, particularly as there is no guarantee that average rates will continue their downwards trajectory.
“Those considering a new mortgage may wish to secure the knowledge and advice of a qualified adviser, who can help with assessing their priorities and calculating the best route forwards for their circumstances.”
| Mortgage market analysis (Source: Moneyfacts.co.uk) | ||||||
| Oct-16 | Oct-19 | Oct-20 | Sep-21 | Oct-21 | ||
| Fixed and variable rate products | Total Product count – all LTVs | 4,091 | 4,955 | 2,259 | 4,812 | 4,939 |
| Product count – 95% LTV | 240 | 371 | 12 | 283 | 293 | |
| Product count – 90% LTV | 570 | 758 | 51 | 579 | 610 | |
| All LTVs | Average two-year fixed rate | 2.38% | 2.45% | 2.38% | 2.38% | 2.25% |
| Average five-year fixed rate | 3.02% | 2.75% | 2.62% | 2.63% | 2.55% | |
| 95% LTV | Average two-year fixed rate | 3.97% | 3.28% | 4.74% | 3.57% | 3.32% |
| Average five-year fixed rate | 4.51% | 3.64% | 4.08% | 3.83% | 3.63% | |
| 90% LTV | Average two-year fixed rate | 2.81% | 2.65% | 3.64% | 2.85% | 2.56% |
| Average five-year fixed rate | 3.53% | 2.96% | 3.89% | 3.23% | 3.05% | |
| Data shown is as at the first available day of the month, unless stated otherwise. Source: Moneyfacts Treasury Reports | ||||||
First-time buyers
It would seem many lenders are keen to support first-time buyers at the moment. Take Coventry Building Society, which announced last week it was launching new deals for those taking their first step on the property ladder.
As well as offering £500 cashback as an incentive the building society has also made changes to lending policy to make its mortgages more accessible to first-time buyers. For example, it will allow first-time buyers who have not yet completed a probation period to apply for a deal.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “It’s a really challenging time to be taking that all-important first step on the property ladder, with rising house prices and the difficulties of saving for a deposit.
“We’re fully committed to supporting first-time buyers – we’ve significantly increased our lending in this area this year, and our new mortgage range will enable us to help more people buy their first home.”
These deals, however, are only available through brokers, so you’ll need to apply via this route.
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