Mortgage blog: Low-deposit mortgages finally start to get cheaper
Over recent months, the cost of mortgage deals has fallen sharply. Strong competition between lenders and the government's Funding for Lending scheme have resulted in a price war between lenders with many offering rates never before seen in the UK.
However, most of the low rates have been reserved for low-risk mortgage borrowers - typically those putting down 40% or more. Now, though, there are signs that cheaper deals are finally becoming available to borrowers looking for a higher loan-to-value mortgage.
Lender launches 1.99% fixed rate for borrowers with 25% equity
Over the last few weeks two-year fixed-rate mortgages have reached record lows. The West Bromwich Building Society recently launched a deal at just 1.48% for clients wanting to borrow up to 60%.
Now, though, a lender has launched a deal at under 2% for borrowers with just 25% equity. The Chelsea Building Society has unveiled a two-year fixed rate at 1.99% for borrowers wanting a 75% mortgage, leaping to the top of the ‘best-buy' tables in the process.
The Chelsea deal carries a £1,545 fee and £130 ‘processing' charge - a total of £1,675 upfront. Some of Chelsea's mortgages also include incentives such as up to £500 cashback or free legal and valuation assistance. The Daily Telegraph says that this latest offer from Chelsea is "good news for borrowers, who should be able to cut their repayments significantly".
Keith Osborne, editor of WhatHouse.co.uk says: "While mortgage rates have been tumbling for low-risk clients over recent months, first-time buyers and those borrowers with a small deposit have continued to find it difficult to secure mortgage finance at a decent rate. This is therefore a significant moment as it shows that lenders are starting to compete for business in the higher loan-to-value market. If rates continue to fall ahead of the next part of the Help to Buy scheme which is set to launch in January, there should be some extremely competitive products available for borrowers who don't have a large deposit."
The market leading deal comes as new research has found that there is now a wider choice of mortgage products available than at any time since 2008. Research by a leading mortgage broker has found that there were 10,262 deals available in July, a 198% increase since July 2009 when fewer than 4,000 deals were available.
"Falling rates and an increasing choice of deals mean that the mortgage market is healthier than it has been for some time," adds Osborne. "However, there is still some way to go before the number of mortgages agreed returns to the levels we have been used to."
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