Product choice for low-deposit borrowers climb as fixed rates fall slightly
The number of mortgages available for borrowers with small deposits has reached its highest point in over 17 years, according to price comparison website Moneyfacts.
Its latest Mortgage Trends Treasury Report showed that the combined total of 90% and 95% loan-to-value (LTV) products now accounts for 19% of all residential mortgage offerings, with overall product choice at its highest since 2007.
Data shows that there are now 1,360 mortgage deals at the 90% and 95% LTV tiers, a level not seen since March 2008, when the figure stood at 1,532. Specifically, 95% LTV products have increased to 464, while 90% LTV deals have risen to 896, both representing 17-year highs. Across the market, the total number of mortgage products has grown to 7,062, the most since October 2007.
Average fixed rates have continued to decline, though the reductions are modest. The average two-year fixed rate dropped by 0.05% to 4.96%, while the five-year fixed average edged down by 0.01% to 5.00%. These rates are now at their lowest since September 2022 and May 2023, respectively.
Over the past year, the two-year fixed rate has fallen by 0.60%, and the five-year by 0.20%. The Moneyfacts Average Mortgage Rate now stands at 5%, down from 5.04% last month and significantly lower than the 6.41% recorded in September 2023.
Variable rates have also eased, with the average two-year tracker falling to 4.66%. The standard variable rate (SVR) has decreased to 7.32%, down from its peak of 8.19% in late 2023. The average shelf-life of a mortgage product remains at 17 days.
“Borrowers with a limited deposit or equity of just 5% or 10% will find the choice of higher loan-to-value (LTV) deals has risen to its highest point in 17 years,” said Rachel Springall, finance expert at Moneyfacts.
“However, it is worth noting these deals represent just 19% of the market overall, up slightly from 17% a year ago, while product choice as a whole for residential mortgages has expanded to its highest count since October 2007.
“The government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive. However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins.”
Springall (pictured right) added that the margin of falls to the overall average fixed mortgage rates shrunk month-on-month due to the unsteadiness of swap rates.
“As we have seen countless times, lenders can adopt a more cautious approach to pricing their mortgages when swap rates rise, leading to small margins of moves, but deals can still be reviewed,” she said.
“First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living. However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder.
“Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”
Meanwhile, Mary-Lou Press, president of industry body NAEA Propertymark, agreed that while property transactions remain buoyant and many buyers are able to access mortgages, it’s evident that affordability and raised house prices are a continuous battle.
“Now that Stamp Duty has risen across England and Northern Ireland, this is likely making it even more difficult to access better mortgage products due to further financial constraints,” she said. “It also has the potential to distort the housing market, often stopping people from moving when they want to.”
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