Mortgage rates for those with a ten per cent deposit have fallen from 3.75 per cent in December and 3.65 per cent in January, driven down by more lenders re-joining the higher LTV lending market.
Compared to February 2020 when the average interest rate was 1.97 per cent, 90 per cent rates still remain high.
A borrower with a £150,000 mortgage over 25 years, excluding fees, paying 1.97 per cent for two years would pay £634 a month, and £15,216 over the two years.
On the current average rate of 3.5 per cent the monthly payment would be £117 higher and with an additional £2,808 due over the two-year product term.
Average 95 per cent LTV deals, which are currently only being offered by small regional building societies to local applicants, or by high street banks to their existing borrowers, stand at 4.14 per cent after gradually falling from 4.2 per cent in December.
Mortgages for borrowers with a five per cent deposit will soon become more commonplace once again, following the chancellor’s Budget unveiling of a 95 per cent government-backed mortgage guarantee scheme.
Rishi Sunak said the HSBC, Santander, Barclays, NatWest and Lloyds had all agreed to release 95 per cent mortgages next month, with products expected to hit the shelves from mid-April. Virgin Money is set to follow in May.
Anthony Codling, chief executive of Twindig, a property platform, said: “It will be interesting to see what impact the government mortgage guarantee scheme has on 95 per cent LTV mortgage rates.
“Current two-year fixed rates of 4.14 per cent are more than 2.5 times higher than that of a 75 per cent LTV two-year fix.
“With the stamp duty holiday extension likely to lift house prices further, the government mortgage guarantee has to lead to a significant reduction in mortgage rates for those with low deposits otherwise it won’t be worth the paper it’s written on and those it was intended to help, generation rent, will continue to struggle to get a foot on the housing ladder and remain a generation of renters not buyers.”