Mind the mortgage rate gap | moneyfacts.co.uk
MONEYFACTS ARCHIVE. This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Published: 24/04/2017

Average mortgage rates as a whole have been falling fairly consistently in recent years, yet as our latest research shows, there's starting to be a divide between lower and higher loan-to-values (LTVs). As a result, the gap between the average rate at 60% LTV and the highest LTV band (95%) has expanded considerably, with the divergence growing by 0.31% since October.

The table below highlights the change in more detail, with the difference driven by the continually falling rates at 60% LTV and the recent uptick at higher borrowing tiers. Indeed, the average two-year fixed mortgage rate at 95% LTV is now higher than it was a year ago, a sharp deviation from recent patterns, having risen by 0.21% in just six months.

Average Two-Year Fixed Rate Apr-12
Apr-16 Oct-16 Today
95% LTV 5.62% 4.15% 3.97% 4.18%
60% LTV 4.20% 1.96% 1.91% 1.81%
Difference 1.42% 2.19% 2.06% 2.37%
Source: Moneyfacts.co.uk Compiled 24/04/2017

"With improvements seen throughout the mortgage market of late, particularly for those with a 5% deposit, many would assume that the LTV gap would have narrowed or even been bridged," said Charlotte Nelson, finance expert at Moneyfacts.co.uk. "However, it is disappointing to find that the reverse is true, with the gap bigger now than it was five years ago.

"Deals on the market today can seem worlds apart, particularly when you look at the lowest rates available. For example, the lowest two-year fixed rate on the market at 60% LTV is 0.99%, whereas the lowest at 95% stands at 3.29% – a whopping 2.30% difference."

As Charlotte explains, the 60% LTV sector has been lenders' main target for some time, largely thanks to the reduced risk associated with this form of lending. As a result, providers have been actively seeking to make it to the top of the Best Buy charts and boast the lowest rates across the market – only last week, competition stepped up a notch with the lowest ever mortgage rate being released – and it is this intense competition that has seen the gap grow.

"There will always be a difference between the two sectors due to the extra risk involved in lending to a borrower who has just a 5% deposit, compared to those who have a much larger deposit," said Charlotte. "First-time buyers may feel that they are hit almost twice, with them not only having to struggle to gather enough cash for a deposit, but then also face a significantly higher rate which could see them pay an extra £184.74 a month [based on a £150,000 mortgage over a 25-year term].

"First-time buyers should not be discouraged, however, as borrowers sitting close to the 90% LTV bracket could reduce their monthly repayments by saving that little bit extra to be able to move to the lower band. With plenty of deals now out there, borrowers at any LTV have the pick of the bunch, so they would be wise to shop around to assess the options that are available to them."

What next?

Compare the best mortgage rates, whatever your deposit, using our Best Buys

Use our mortgage calculator to find the best mortgage for your needs

Find out how to build that all-important deposit, then check out the best mortgages for first-time buyers


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.

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