The UK mortgage market is seeing more 95 percent mortgages on offer. Lenders are now more willing to lend a borrowed five-and-a-half-times their annual salary, in a reverse of stricter lending policies introduced in the aftermath of the 2008 financial crash.
Most borrowers have had to find a minimum 20 percent deposit with many lenders demanding a 25 percent deposit before being willing to lend on a purchase.
However, according to consumer champion Which, while a 95 percent mortgage will necessarily be more expensive to service, using this kind of finance could be more beneficial to first-time buyers.
Access to wider range of properties
Many first-time buyers are using the Government’s Help to Buy scheme, accessing an equity loan for 20 percent of the purchase price of their first home and finding the remaining 5 percent on their own. While the equity loan is interest-free for five years, the interest rate rises to 1.75 percent and then increases every year by the Retail Prices Index (RPI) plus 1 percent.
As Which points out, the biggest limitation to a Help to Buy equity loan, which effectively allows the buyer to access a 95 percent mortgage, is that they are only available on newbuild properties up to the value of £600,000. By contrast, a 95 percent mortgage direct from a lender can be used on any property, old or new, so long as the buyer has the deposit and can afford the repayments.
More competitive repayment rates
And with more lenders offering 95 percent mortgages, Which has noted that the rates of those mortgages are also getting cheaper. According to its latest research, a two-year fixed-rate deal on a 95 percent mortgage has a 4.06 percent rate of interest with five-year fixed-rate deals at 4.43 percent.
Among those offering 95 percent mortgages in England and Wales are Marsden Building Society, Nottingham Building Society and Atom Bank, the latter a newcomer to this type of mortgage.
Trust Homeward Legal to complete purchase
First-time buyers and home movers who are looking to move with a 95 percent mortgage can get the best conveyancing deal for their purchase with Homeward Legal. We work with expert property lawyers across England and Wales who know the ins and outs of both Help to Buy and the conventional mortgage market.
The conveyancing solicitors we work with are also all on the approved lenders’ panels, ensuring they can act for both you and the lender without any delays.
Call Homeward Legal now on 0800 038 6699 to find out how our low-cost, high-quality service can make your purchase a reality. Or get an instant online quote.