Borrowers would be wise to consider deals outside of the government’s Mortgage Guarantee Scheme to ensure a wide choice of products, according to Moneyfacts.
Compared to the five deals available at 95% loan-to-value (LTV) earlier this year, choice for those with the smallest deposits has risen dramatically, as a total of 78 more options have appeared since the start of April, both within and outside of the Mortgage Guarantee Scheme.
Availability at 90% LTV has also improved, but remains a significant way off the 779 deals that were available pre-pandemic.
The influx of higher LTV deals has seen the average fixed rates for the top lending tiers drop since the start of this month.
Although the slight fall in average rates, along with the increase in deals to choose from in the market, is good news for borrowers with a small deposit, when taking into account other factors such as rising house prices and the affordability of monthly repayments, could result in those with a small deposit still struggling to buy a home. For example, the average house price now stands at £232,134, which would require a 5% deposit of £11,607 to purchase. A buyer locking into a two year fixed deal at a rate of 4.02% on a 35-year term would have monthly repayments of £1,166.46, while those locking into a five-year deal at a rate of 4.17% on a 25-year term would have monthly repayments of £1,184.82 – borrowers can see how much their mortgage repayments will be using our mortgage repayment calculator. Depending on the income of the household, these repayments may be considered unaffordable by some mortgage lenders.
All average fixed mortgages rates bar the 10-year fix rose this week, show figures from Moneyfacts. The average two-year fix gained 2 basis points, ending the week at 2.57%, the average three-year fix increased by 1 basis point to 2.70% and the average five-year fix went up 1 basis point to 2.80%. Meanwhile, the
HSBC, Barclays and NatWest among first high street names to offer new 5% deposit mortgage deals
Many of the new low deposit deals are available to first-time buyers, existing homeowners and self-employed applicants.
More lenders are expected to offer low deposit deals to first-time buyers and exiting homeowners (Image: Getty Images)
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