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High LTV borrowers charged up to 2% more

  • 11/11/2011
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High LTV borrowers charged up to 2% more
Homebuyers borrowing at 90% LTV are paying significantly more interest on average than people taking out equivalent mortgages at 70% LTV, Defaqto has found.

According to its data based on average rates for 2, 3 and 5 year fixes and 2 year base rate tracker mortgages, homeowners borrowing at higher LTVs are charged 1% to 2% more in annual interest payments than those on lower LTV deals.

Its research showed that the average interest rate charged for a two-year tracker at 70% LTV stands at 3.36% compared to 5.35% at 90% LTV, a difference of 1.99%.

David Black, Defaqto’s insight analyst for banking said that the gap between rates on higher and lower LTVs will start to close once Bank Base Rate rises. 

He said: “The low base rate has undoubtedly held mortgage rates down, but at the same time growing speculation about house price movements as well as future base rate changes makes it difficult for borrowers to make decisions with real confidence.

“However, once the base rate starts to increase it will inevitably force mortgage rates upwards.”

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