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Mortgage rates for buyers with small deposits hit record low

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24/09/2018
The average rates for a 95% loan to value (LTV) mortgage are the lowest on record despite two Bank of England base rate rises in the last year, according to data from Moneyfacts.

Its data highlights the competitive nature of the mortgage market at the moment which is continuing to drive rates down, particularly for first-time and small deposit buyers.

Over the last five years, the average five-year fix has fallen from 5.38% in September 2013 to 4.08% this year.

Perhaps most remarkably, this includes a fall from 4.50% since September 2017 despite the Bank of England Base Rate increasing by 0.5% in that time.

Two-year fixes have also continued to fall over this period from 5.67% in September 2013 to 3.73% this year – again including a notable fall of 43 basis points in the last 12 months.

First-time and low deposit buyers are also benefitting from a boom in the number of mortgages available, with 345 95% LTV deals this month, 120 more than in September 2016, Moneyfacts added.

It said this extra choice was borne from providers looking to offer these borrowers a wide variety of choice by launching multiple options within the same range.

More lenders, more deals

Moneyfacts spokeswoman Charlotte Nelson noted that lenders were looking to target new customers while new entrants were also forcing the issue with the number of lenders in this sector growing by 10 in two years to stand at 58.

“This is a result of many providers beginning to feel the lower LTV sectors are becoming increasingly saturated and are therefore looking for alternative areas to branch into.

“This includes the high LTV market and, as a consequence, competition in this area is increasing.

“Rate-wise, things have never looked better for first-time buyers, however these deals still have significantly higher rates than the rest of the market. So, if borrowers are at all able to save even an extra 5% to move them into the 90% LTV bracket, they will be financially better off,” she added.

Nelson noted that the average two-year fixed rate at 90% LTV stood at 2.76% today, almost a full 1% lower than the 95% LTV equivalent.

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