Positive news for first-time buyers as choice of great mortgage deals improves 

Posted 5 February 2015

It has been a tough few years for first-time buyers. After the credit crunch, many lenders withdrew their low-deposit mortgage deals making it almost impossible to buy a property with a 5% or even 10% deposit.

However, over recent months the choice of high loan-to-value mortgage deals is increasing and the rates on some of the best 90% and 95% deals have been falling. A leading lender says that there are more first-time buyers now than at any time since 2007, proving that it is becoming easier to buy a home with a small deposit.

Low-deposit mortgages getting cheaper

Recent figures from Halifax based on sales of its own mortgages showed that there were more first-time buyers taking out home loans in 2014 than in any other year since 2007 – before the global financial crisis.

Many lenders have relaxed their criteria and now offer a wider choice of products to customers with a small deposit and, crucially, these deals are also becoming cheaper.

Keith Osborne, editor of Whathouse.com, says: “Today there are 95% mortgages available at interest rates below 3.5% meaning that you can bag an exceptionally low interest rate even if you only have a deposit of 5% of the purchase price.

“While the very best interest rates may be reserved for borrowers with a larger deposit – typically around 40% – the cost of deals for first-time buyers has also been falling. It is now possible to benefit from a terrific deal even if you need a 90 or 95% mortgage.”

90% deals available at below 3%

Most first-time buyers chose a fixed-rate product in order to benefit from the security of knowing exactly what their mortgage repayments will be for a set period of time. The Guardian highlights Yorkshire Building Society’s current deal which offers a fixed rate of 2.94% until January 2017 for borrowers with a 10% deposit. There is a £975 fee.

If you are looking for longer-term security, the most competitive five-year fixed-rate deals at 90% lending are at 3.99% with Clydesdale Bank, Yorkshire Bank and Coventry Building Society. There are different levels of fees and incentives in each case.

If you want to borrow 95% then there are also some good deals around. Hanley Economic Building Society has recently launched a two-year fixed-rate priced at 4.49% for borrowers with only a 5% deposit to put down. The fee is £250.

“This is highly competitive and enters the market as the lowest deal in its sector, so it is likely to prove a popular choice for borrowers with a small deposit,” says Charlotte Nelson of Moneyfacts.

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