In the aftermath of the economic downturn mortgage choice at 90% and 95% loan-to-value (LTV) became woefully limited. However, research from Moneyfacts.co.uk shows that product availability for borrowers with small deposits has now expanded to reach its highest level since April 2008.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“In recent years borrowers with smaller deposits have been able to benefit from schemes designed to boost what is often considered to be the lifeblood of the housing market. The most effective has been the Help to Buy Mortgage Guarantee Scheme, which has made lending to small deposit holders socially acceptable again.

“The increase in the number of deals means that lenders aren’t just pedalling standard products, either, but are instead offering an array of incentive packages and fees, allowing borrowers to tailor their mortgage to their needs. This is a fantastic development for first-time buyers (FTBs) who had previously struggled to find an eligible deal let alone an attractive mortgage package.

“In other good news, competition in the overall mortgage market has seen rates plummet to record lows, including in the 90% and 95% LTV sectors. For example, the average two-year fixed rate at 90% LTV has fallen from 4.27% two years ago to just 2.99% today – the first time the average has ever dipped below 3%. The average two-year fixed rate at 95% LTV has also dramatically fallen, dropping from 5.22% to 4.17% over the same period. So, not only can borrowers benefit from greater choice, but they can also profit from highly competitive rates.

“As rates are so low, borrowers taking advantage of these deals would be wise to think about making overpayments so they can increase the amount of equity they own and reduce their outstanding balance, enabling them to get an even better deal when they remortgage in the future.

“All in all, these all-time low rates and the expanded product choice at high LTVs mean that things have certainly started to look up for small deposit holders. However, more choice can lead to more confusion, so it’s vitally important for borrowers to look at the whole mortgage package and take financial advice where necessary before making a firm decision.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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