While many of the record low mortgage rates launched on to the market are reserved for those with a sizeable deposit, the latest research from moneyfacts.co.uk shows that the higher loan-to-value (LTV) market is going from strength to strength, seeing not only a significant drop in rate but also the number of two-year fixed rate deals on offer hitting an all-time high.
The table below highlights the recent improvement, with average rates plummeting in the last five years as availability more than doubles. Those with a deposit of just 10% have never had it so good, with more choice and record low rates offering plenty of opportunity to snap up a cost-effective deal.
|Average Two-Year Fixed Rate||5.47%||3.35%||2.86%||2.63%|
|Number of Two-Year Fixed Deals||101||197||196||275|
"This is great news for borrowers with small deposits who have felt almost ignored by the market, as not only have rates at 90% LTV fallen to an all-time low, but the number of two-year fixed rate mortgages available has seen a 29% increase in just one year," said Charlotte Nelson, finance expert at moneyfacts.co.uk
"A lot of the boost in deals could be down to the fact that borrowers may be under the impression that a 95% LTV deal is a rare occurrence, opting to save a little bit extra to put them into the next LTV band instead, and this extra demand is now being catered for.
"Not only that, but with lending at higher LTVs now more the norm, the 90% tier has become a key target for lenders who are looking for a new avenue in which to compete and stand out from the crowd, as other parts of the market start to become saturated."
Not just for first-timers
Then there's the fact that this lending tier is no longer reserved for new buyers, as Charlotte explains: "The 90% LTV bracket is often considered for first-time buyers, but many borrowers who took out a 95% LTV deal a few years ago could now be starting to weigh up their options for remortgaging into this section of the market.
"Providers who don't want to lose a chunk of their mortgage book therefore have to up their game by not only offering better choice, but also lower rates, in order to appeal to these new remortgagors."
However, it isn't all positive news, as those looking for a 95% deal will find that the choice remains small, with just 89 mortgages currently available at this level. Rates are significantly higher, too, with the average two-year fixed rate at 95% LTV standing at 4.16%.
This means borrowers opting to save the extra cash for a 90% LTV deal will be rewarded greatly with a rate that's a substantial 1.53% lower – based on a £150,000 mortgage with a 25-year term on a repayment-only basis, this means you could be £122.28 a month or £1,467.36 a year better off.
"While more choice is only a good thing, it is more important than ever for borrowers to shop around and consider the true cost of the deal to ensure they get the best possible option," concluded Charlotte. "Anyone unsure should seek the support of a financial adviser."
Use our mortgage calculator to find the best deal possible
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.