Mortgage blog: Choice of low-deposit home loans has risen – but so have rates

Posted 30 December 2014

If you’re looking for a mortgage with a small deposit then you now have three times the choice of deals as you did a year ago. The choice of high loan-to-value mortgage products has tripled in the last twelve months, making it easier for thousands of borrowers to get onto the property ladder.

However, research has found that the cost of 95% mortgage deals has also risen, despite falling rates in other parts of the market.

Choice of 95% deals rises from 37 to 180 in just two years

Figures from financial research company Moneyfacts have revealed there are now more than 180 deals available for borrowers putting just 5% down. This compares to 62 deals a year ago and just 37 in November 2011 when most lenders required at least a 10% deposit.

Commenting on the research, Moneyfacts expert Charlotte Nelson says: “News of the change will be music to the ears of people struggling to save enough to get on the housing ladder.”

A greater choice of 95% deals gives homebuyers more choice of products and widens the scope for first-time buyers to get onto the housing ladder. This research follows further good news for first-time buyers in the shape of changes to stamp duty which should cut the amount of tax paid on first homes.

Cost of low-deposit deals rises – and there are risks

While the choice of high loan-to-value mortgages has tripled in the last year, the cost of these deals has actually become more expensive.

Moneyfacts research for The Mail on Sunday has revealed that the average two-year fixed rate for low-deposit buyers is 5.22%, up from 5.11% a year ago. The average five-year fix has also risen, from 5.28% to 5.38% today.

Keith Osborne, editor of, says: “While first-time buyers may have a wider choice of deals they are still paying a significant premium for the chance to borrow 95%. And, that’s also assuming they pass the affordability checks which are particularly tough for borrowers with a small deposit.

“You should also bear in mind that if house prices were to fall again then first-time buyers who have borrowed 95% will be some of the first to fall into negative equity. However, if you can afford your repayments and you’re keen to get onto the housing ladder then a wider choice of mortgage deals should help you.”

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