Leanne Macardle

Leanne Macardle

Editor
Published: 30/04/2019

It can be difficult for first-time buyers to take that initial step on the ladder, but happily, they could now find it easier to secure a low-cost mortgage to suit, with the latest research from Moneyfacts.co.uk revealing that the number of providers offering mortgages to those with a 5% deposit has risen substantially in recent years, and rates have plummeted as a result.

Boost for first-time buyers

The data shows that 60 providers now offer residential mortgage products at up to 95% loan-to-value (LTV), up from 53 a year ago and a sharp rise from just three in April 2009, when providers turned away from this sector in the aftermath of the financial crisis. The number of 95% LTV products available has risen just as dramatically over the same period, and in turn, this boost in competition has forced rates downwards.

As the table below highlights, the average two and five-year fixed mortgage rates at 95% LTV have fallen by 0.73% and 0.71% respectively in just 12 months to stand at 3.28% and 3.73%, both of which are record lows, which means first-time buyers have never had it better if they want to take that first step.

Maximum 95% loan-to-value residential mortgages

 


Number of providers


Number of fixed rate products


Number of variable rate products


Average two-year fixed rate (95% LTV)

Average five-year fixed rate (95% LTV)


April 2019


60


338


67


3.28%


3.73%


April 2018


53


246


58


4.01%


4.44%


April 2014


47


153


28


5.31%


5.48%


April 2009


3


3


0


N/A


7.09%


Source: Moneyfacts.co.uk

"A decade ago, borrowers who could only raise a 5% deposit had just three products from three mortgage providers to choose from," said Darren Cook, finance expert at Moneyfacts.co.uk. "Today, a borrower can choose between 405 products available from a total of 60 providers. As more firms become willing to lend at this higher-risk tier, it means that potential homeowners have a greater choice of products, incentives and service, which can only be good news for borrowers."

Mortgage certainty

The fact that 83% of mortgages at this level (338 of the 405 currently available) are fixed rate deals is particularly notable, but it also isn't that surprising; Darren explains that these deals "enable borrowers to have the certainty of knowing their monthly repayment amount, which is perhaps of particular importance to those taking their first steps on the property ladder.

"There clearly seems to be a positive drive by mortgage providers to try and secure the business of potential first-time buyers, the lifeblood of the mortgage market, and it is encouraging to see rates decrease because of this healthy competition."

The fact that rates have fallen to record lows will come as particularly welcome news to those now searching for their first home, and means now could be a great time to take the plunge. Of course, first-time buyers will still need to jump through several affordability hoops to prove they can afford their preferred mortgage, but with average rates lower, things should hopefully be slightly easier. Start the process by comparing the best first-time buyer mortgages available and see if you can make it onto the first rung of the ladder.

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.

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