Given we are seeing increasing numbers of first-Time Buyers coming back to the market, the good news for those looking at purchasing a property with a smaller deposit is that there is now more choice available from lenders than there has been for some time.
What is more, competition amongst lenders that is normally reserved for the low Loan-To-Value market has spread higher up the scale to high Loan-To-Values as well. As such those with a 10% deposit can get historically competitive rates from 1.64%, (4.47% APRC) on a discounted variable rate through Accord or 1.84%, (3.64%) fixed for 2 years through HSBC.
The big difference in lenders is around fees, some will offer free valuations or cash backs towards legal fees, and perhaps more importantly service standards. Sometimes buyers need to move quickly in a competitive market to secure the home of their dreams and getting a slightly cheaper rate is pointless if by the time the mortgage offer is received someone else has snapped up the property.
For those with only 5% deposit, again there is much more choice with a raft of straightforward 95% LTV mortgages, for example Accords’ 2.99% discounted mortgage, (4.73% APRC) as well as a range of lenders who offer family deposit / guarantee schemes. These may allow a buyer to obtain a cheaper mortgage on the basis that their family either deposits, guarantees or takes out a loan on their existing property to help. The Post Office Family link, Barclays Springboard and Family Building Society schemes are amongst those worthy of consideration.
It is important for borrowers with small deposits to make sure they get professional advice, as at this end of the market differences between lenders or missing out on the most suitable product can be expensive mistakes to make. The high street may well not be the best place to obtain a mortgage and many of the best products here come from the smaller Building Societies or through the broker market.
For those with larger deposits or equity, 2-year fixes are available at 1.39%, (3.58% APRC) and 5-year fixes from 1.83%, (3.72% APRC) whilst variable discounted rates are around from 0.97%, (4.40% APRC).
Those looking at a Buy-To-Let can still obtain products from just 1.37%, (4.43% APRC) for a 2-year fix.