Market sees surge in 95% LTV products as rates fall to pre-mini-Budget levels
Average two-year fixed mortgage rates at both 95% and 90% loan-to-value (LTV) have declined to their lowest levels since September 2022, price comparison site Moneyfacts has reported.
This decrease in rates coincides with a notable expansion in the number of low deposit mortgage products, which has reached its highest level since March 2008.
According to the The latest Moneyfacts UK Mortgage Trends Treasury Report, the average rate for a two-year fixed mortgage at 95% LTV now stands at 5.41%, while the equivalent at 90% LTV is 5.24%. Both figures represent the lowest since the period preceding the September 2022 mini-Budget.
The overall average rates for two- and five-year fixed mortgages have also edged down to 4.94% and 5.01% respectively, following a brief increase in the previous month.
Short-term fixed rates have experienced the most significant reductions over the past year. The average five-year fixed rate has dropped by 0.08% since November 2024, while the two-year fixed rate has fallen by 0.45% over the same period. The Moneyfacts Average Mortgage Rate is now 4.99%, a decrease from 5.02% last month and well below the 6.07% recorded in November 2023.
Lender activity has resulted in a slight reduction in the average shelf-life of mortgage products, now at 21 days compared to 22 days previously. The average rate for two-year tracker variable mortgages has also decreased, now at 4.66%. Meanwhile, the average standard variable rate (SVR) remains at 7.27%, below the peak of 8.19% seen in late 2023.
While the total number of mortgage products available has declined month-on-month to 6,918, the choice at the 95% LTV tier has increased to 465 options, the highest since March 2008.
“Lenders are already working hard to price down their mortgages to entice new business as part of their end of year targets, supported by recent falls in swap rates,” said Rachel Springall (pictured right), finance expert at Moneyfacts. “Even existing borrowers can choose to lock into a new rate around six months before their current deal ends in most cases.
“The key date that is causing borrowers to adopt a ‘wait and see’ approach is without doubt the upcoming Budget. So far, the rumour mill has spun out a variety of ideas which could impact borrowers from different ends of the market.
“It is essential borrowers seek advice before they make any quick decisions and not feel rushed because of the Budget rumour mill.”
For Mary-Lou Press, president of industry body NAEA Propertymark, falling mortgage rates and a rise in the number of 95% LTV products are welcome signs that lenders are increasing support for buyers with smaller deposits.
“This will be particularly encouraging for first-time buyers who continue to face significant affordability challenges amid high house prices and a shortage of homes,” she said.
"However, while lower monthly payments can help more people access finance, the fundamental issue of a lack of housing supply remains. Without a meaningful increase in the number of affordable homes for sale, more tailored mortgage deals alone will not solve the wider problems within the housing market.
"It would be a welcome to see the UK government use the upcoming Budget to deliver policies that stimulate housing supply across all tenures, support sustainable lending, and give consumers confidence to move. Measures that boost homebuilding and maintain a balanced, stable property market will ensure that falling mortgage costs translate into real opportunities for households, rather than further upward pressure on prices.”
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