First-time buyers benefit from 95% mortgage price war

Posted 20 January 2016 by Nick Parkhouse

The low-deposit mortgage market is getting ever-more competitive, which is great new for first-time buyers looking for an affordable home loan...

Recent research revealed that the choice of low-deposit mortgages rose by 84% in 2015. More and more 95% deals are becoming available, and lenders are increasingly cutting the cost of these deals in order to attract business.

Over recent months, many lenders have re-entered the 95% mortgage market and the New Year has seen a reduction in the cost of many of them. First-time buyers have particularly benefited from the increase in the choice of deals with almost 300 products now available to borrowers with a 5% deposit.

In addition, the costs of these deals are falling. The Daily Telegraph reports that Nationwide cut the rate on some of its 95% mortgages by 0.4% in January, with its three-year fixed rate falling from 4.79% to 4.39% with a £999 fee.

Other lenders have followed suit, cutting the cost of their mortgages. Keith Osborne, editor of, says: "The choice of 95% mortgages is as high as it has been for years, which is great news for first-time buyers. The cost of these deals is also becoming more competitive as lenders compete with each other for market share."

While many major lenders offer low-deposit mortgages through the Help to Buy scheme, it is also important to compare the cost of deals not tied to Help to Buy.

Why it is important to compare both Help to Buy and non Help to Buy products

In addition to the 95% mortgages available through the government-supported Help to Buy scheme, many banks and building societies are also offering low-deposit deals not tied to Help to Buy.

For example, one of the leading Help to Buy products currently available is a Barclays two-year fixed rate at 3.79% with no arrangement fee. The Daily Telegraph calculates that based on a 25-year £240,000 mortgage this would cost £1,239.15 per month.

However, the Yorkshire Building Society offers a 95% deal not tied to Help to Buy that is cheaper. Their 3.69% two-year fixed rate with no arrangement fee would cost £1,226.09 per month, based on the same £240,000 mortgage over 25 years.

The Post Office Bank offers a five-year Help to Buy fixed rate at 4.57% with no arrangement fee, which would cost £1,343,55 per month. However, the Family Building Society offers a non-Help to Buy five-year fix at 3.64% with a £545 arrangement fee. The monthly repayment is around £124 lower, at £1,219.59.

Osborne adds: “While Help to Buy is certainly helping first-time buyers get great mortgage rates, borrowers should look at the whole mortgage market. My concern is that borrowers only looking at Help to Buy mortgages are at risk of not getting the very best deal.”

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