The cost of 95% LTV deals falls

30 May 2018

Research from moneyfacts.co.uk reveals that the average two and five-year fixed rates at 95% loan-to-value (LTV) have bucked the recent trend of rate rises. In fact, the average two-year fixed rate at 95% LTV has fallen from 4.11% at the start of the month to 4.06% today, while the five-year fixed rate is now priced at 4.43% after a 0.06% drop. As a result, both rates are now lower than they were at this time last year.

Charlotte Nelson, Finance Expert at moneyfacts.co.uk, reports:

“As the market was building up to May’s base rate announcement, the high LTV mortgages weren’t left untouched by the rate rises. However, since it was announced that base rate remains on hold, the rest of the market has continued on its upward trajectory, whereas the higher LTV products seem to be forging their own path.

“This is great news for first-time buyers, especially as they often bear the brunt of any rate rises in the market. Competition in this sector is high particularly among lenders looking to revitalise their mortgage book by bringing new borrowers on board. And it is not just rates providers are using to attract these new borrowers, as an array of different incentive packages and fees means borrowers can now tailor their mortgage to suit their needs.

“While it is great news that 95% LTV rates are falling, borrowers will need to bear in mind that they remain higher than even the rates at 90% LTV. So, by saving an extra 5% for a deposit, first-time buyers will still be significantly better off. To illustrate, the average two-year fixed rate at 90% LTV stands at 2.74% today – meaning borrowers who can save the extra 5% could save a whopping £141.82 a month*.

“With rates still increasing in other sectors of the market, only time will tell how long the 95% LTV tier can continue to buck this trend. So, borrowers considering getting on the property ladder should look at the options now before they miss out on the lower rates.”

*Based on a £200,000 loan over 25 years.