In the aftermath of the economic downturn, mortgage availability at 90% and 95% loan-to-value (LTV) became woefully limited. This made it harder for first-time buyers to take that first step onto the ladder, but happily, the tide is turning: our latest research shows that product availability for borrowers with small deposits has now reached its highest level since April 2008, which makes it a great time for wannabe buyers.
Our data shows just how rapidly things have improved for the sector. Five years ago, there were just 239 mortgages available at 90% or 95% LTV, but this had risen to 671 by this time last year – and availability has increased by 174 in the last 12 months alone, with 845 such products now on offer.
The table below highlights the improvement in more detail:
But what's driven the improvement? Well, much of it can be attributed to Government schemes such as Help to Buy, as Charlotte Nelson, finance expert at Moneyfacts, comments:
"In recent years borrowers with smaller deposits have been able to benefit from schemes designed to boost what is often considered to be the lifeblood of the housing market. The most effective has been the Help to Buy Mortgage Guarantee Scheme, which has made lending to small deposit holders socially acceptable again.
"The increase in the number of deals means that lenders aren't just peddling standard products, either, but are instead offering an array of incentive packages and fees, allowing borrowers to tailor their mortgage to their needs. This is a fantastic development for first-time buyers (FTBs) who had previously struggled to find an eligible deal let alone an attractive mortgage package."
As the figures show, it's a great time to be a first-time buyer at the moment, as not only is product availability for such borrowers at a post-crisis high, but competition in the mortgage market as a whole has seen rates plummet to record lows – and this includes the high-LTV sector.
For example, the average two-year fixed rate at 90% LTV has fallen from 4.27% two years ago to just 2.99% today, which not only marks an impressive drop in its own right, but is also the first time the average for this sector has ever dipped below 3%. The average two-year fixed rate at 95% LTV has also dramatically fallen, dropping from 5.22% to 4.17% over the same period. So, not only can borrowers benefit from greater choice, but they can also profit from highly competitive rates.
However, there are ways to take even greater advantage of the market, as Charlotte explains: "As rates are so low, borrowers taking advantage of these deals would be wise to think about making overpayments so they can increase the amount of equity they own and reduce their outstanding balance, enabling them to get an even better deal when they remortgage in the future.
"All in all, these all-time low rates and the expanded product choice at high-LTVs mean that things have certainly started to look up for small deposit holders. However, more choice can lead to more confusion, so it's vitally important for borrowers to look at the whole mortgage package and take financial advice where necessary before making a firm decision."
Compare mortgages for first-time buyers
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.