Great news for first-time buyers as choice of 95% mortgage deals soars

In recent years, getting a mortgage with a small deposit has sometimes been tough. However, new figures show that the choice of 95% mortgage deals is now at its highest since the financial crisis.

First-time buyers now have a choice of almost 300 products – the highest number for this time of year for almost a decade.

Almost 300 mortgage deals at 95% now available

If you’re a first-time buyer looking for a mortgage that only requires a 5% deposit, you now have the biggest choice since the global financial crisis.

Consumer group Which? reports that there are now 288 deals available at 95% loan-to-value, the highest number for this time of year since 2008.

New products from lenders including AA Mortgages have helped to widen the choice available to buyers with a 5% deposit. The AA is now offering a five-year fixed rate at 3.99% with no initial fees while a number of smaller building societies have two-year fixed rates at 95% available at less than 3%.

The Hanley Economic Building Society has a deal at 2.85% (fees apply) while the Monmouthshire Building Society has a deal at 2.89% with no fees.

Choice of 95% deals steadily rising

Before the global financial crisis, borrowers had a huge choice of 95% deals. According to financial analysts Moneyfacts, ten years ago, in June 2007, there were more than 900 deals available.

Two years later there were just six 95% deals, as mortgage lenders tightened their criteria and moved away from ‘riskier’ lending. Since 2009, the choice of low deposit deals has been steadily rising, reaching 54 in June 2013 and then 175 the following year.

In the last two years around 120 new products have hit the market, giving first-time buyers a hugely increased choice.

What you need to know if you’re thinking of taking out a 95% mortgage

95% mortgages allow you to buy a home with just a 5% deposit, meaning you may not have to save for years to get onto the property ladder.

However, interest rates on these deals are generally higher than on other products, and so you can expect your mortgage payments to be higher than if you saved a bigger deposit.

You should also bear in mind that a 95% mortgage may also be riskier for you. As you own a smaller share of your home, any fall in the value of your property could leave you in negative equity – where you owe more than the value of your home.