New research from moneyfacts.co.uk has revealed that interest rates for borrowers with only a 5 percent deposit have fallen from an average 4.19 percent in October 2017 to 3.30 percent in March 2018.
Meanwhile, the gap between an average two-year fixed mortgage for a 95 percent loan-to-value and a 90 percent loan to value is at its narrowest in six years, currently standing at 0.65 percent. It was 1.57 percent in October 2017.
Darren Cook, finance expert at moneyfacts.co.uk, said: “It is evident that healthy competition among providers at the maximum 95 percent LTV tier has been the catalyst in causing the average two-year fixed mortgage rate at this level to fall by 0.72 percent in the last year, down from 4.02 percent in March 2018 to 3.30 percent today.
“Providers need to factor in the greater potential of default on higher LTV mortgages, which is why rates are typically higher at 95 percent LTV, but as we’ve seen, they’re increasingly willing to sacrifice these margins in order to compete.”
According to moneyfacts.co.uk, the average two-year fixed rate for a maximum 90 percent LTV (meaning the first-time buyer needs at least a 10 percent deposit) has risen by just 0.03 percent to 2.65 percent today.
But the average 95 percent LTV has actually fallen by 0.95 percent to 3.30 percent over the same period, meaning this mortgage product is more affordable for first-time buyers who can only raise a small deposit.