The firm pointed out that over the last year the average interest rate on a 95% loan to value (LTV) two-year fixed rate deal has dropped from 3.98% to 3.46%, while rates available on three- and five-year deals have also fallen over the same period.
The increase in competitive deals for low deposit borrowers has coincided with a jump in the number of such products in the market. Defaqto noted that there are now 290 95% LTV deals available, up by almost 50% from the 199 deals on the market 12 months ago.
There has also been an increase in the number of lenders offering these deals from 52 to 58.
Brian Brown, head of insight at Defaqto, pointed out that buying a home is a big investment, and rising prices have kept home ownership out of reach for many.
He added: “It looks like the cost of buying a home has just got a bit easier for first-time buyers as prices have finally stopped rising and mortgages are cheap.”
According to the latest data from the Office for National Statistics, annual house price growth has dropped to the slowest rate seen since 2013, while E.surv has suggested the jump in mortgage approvals seen in January was driven by borrowers with small deposits.