First-time buyers certainly don't have it easy, but our latest research finds that they are getting some help. While many mortgage rates have continued to rise despite base rate remaining on hold, the average fixed rates over two and five years at 95% loan-to-value (LTV) have bucked the trend.
Charlotte Nelson, finance expert at moneyfacts.co.uk, reports that "the average two-year fixed rate at 95% LTV has fallen from 4.11% at the start of the month to 4.06% today, while the five-year fixed rate is now priced at 4.43% after a 0.06% drop. As a result, both rates are now lower than they were at this time last year."
Rates for those with just a 5% deposit did rise prior to the base rate announcement, as did most other rates, especially when it was widely thought that base rate would go up this month. However, while "the rest of the market has continued on its upward trajectory", Charlotte said that "the higher LTV products seem to be forging their own path."
Some of this welcome activity could be explained by lenders wanting to bring new borrowers on board, to revitalise their mortgage book. "And it is not just rates providers are using to attract these new borrowers, as an array of different incentive packages and fees means borrowers can now tailor their mortgage to suit their needs," Charlotte added.
However, borrowers should bear in mind that rates at 95% LTV are still higher than those at 90% LTV. Indeed, by saving an extra 5%, borrowers could save a whopping £141.82 per month (based on a £200,000 loan over 25 years), when comparing the average two-year fixed rate at 90% LTV of 2.74% to the average 95% LTV equivalent.
Even if you can't afford that 5% extra, there are still things you can do to make life a little bit simpler while you go through the mortgage process. Specifically, Charlotte has some top tips to share:
If you've got your deposit all sorted and are ready to take the plunge, Charlotte warns that "With rates still increasing in other sectors of the market, only time will tell how long the 95% LTV tier can continue to buck this trend. So, borrowers considering getting on the property ladder should look at the options now before they miss out on the lower rates."
Have a look at the first-time buyer chart or search through the best mortgage deals to get an idea of what's out there. If you're not yet ready, consider using a lifetime ISA or Help to Buy ISA to help you over the deposit-saving finish line and into your first home.
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.