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Mortgage choice for small deposit borrowers at highest level in over a year

Mortgage choice for small deposit borrowers at highest level in over a year
Shekina Tuahene
Written By:
Shekina Tuahene
Posted:
13/11/2023
Updated:
13/11/2023

The options available for mortgage borrowers with a 5% or 10% deposit have reached the highest point since before the disastrous mini Budget in September last year.

In November, there were 254 products available at 95% loan-to-value (LTV) for those with a 5% deposit. This is the highest since the start of September last year, according to the Moneyfacts UK Mortgage Trends Treasury Report.

The number of options at 90% LTV (10% deposit) is currently at 709, compared to 735 before the mini Budget. 

Last year’s mini Budget shocked the markets and resulted in a number of mortgages being withdrawn. 

But since then, product choice has improved across the board, Moneyfacts found, with 5,678 on the market. 

This was the fourth consecutive month that mortgage options increased and is the highest level of product availability in more than 15 years. 

Moneyfacts said the last time there were this many mortgages available was March 2008, when there were 6,192 deals. 

Rachel Springall, finance expert at Moneyfacts, said: “The growing choice of mortgage options demonstrates a buoyant period for the market as the year-end edges closer. Borrowers with a limited deposit or equity of just 5% may be pleased to find more choice of deals in this sector.  

“However, if borrowers can stretch their budget by another 5%, they will find more than 700 options at 90% LTV, which is its highest count since February 2022.” 

Mortgages available for longer 

The average shelf-life of a mortgage product increased to 20 days, the highest since June this year when the average shelf-life was 22 days.  

This has also risen for the last four months and is significantly higher than the recent record low of 12 days recorded in July. 

Springall said reduced volatility in the mortgage market was “prevalent” in October. 

She added: “These are promising signs that the market is settling and could result in more time for borrowers to take advantage of new offers. However, there is no telling how long this may last, as there are growing expectations for fixed rates to fall further, and this could impact the shelf-life of competitively priced deals.  

“Lenders will need to carefully balance their pricing and consider any end-of-year targets they expect to hit.” 

Falling rates 

The average two-year fixed rate fell from 6.47% in October to 6.29% in November, while the average five-year fixed rate declined from 5.97% to 5.86%. 

Both were lower than this time last year, when average rates were 6.47% and 6.32% for a two- and five-year fix respectively. 

The gap between the average two- and five-year fixed rate narrowed from 0.5% last month to 0.43% this month with a five-year fix coming in as the cheaper option. 

There was only a slight change recorded with variable rates, as the average standard variable rate (SVR) rose from 8.18% to 8.19% month-on-month. Moneyfacts said this was the highest SVR on record. 

The average two-year tracker rate fell from 6.17% in October to 6.15% in November. 

Springall said: “Fixed rates on average have now dropped for the third consecutive month and both the average two- and five-year fixed rates stand at their lowest points since June 2023. Year-on-year, the market has seen substantial recovery when it comes to choice, but there is still more room for improvement for those borrowers waiting for fixed rates to fall further before they secure a new deal.”