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Cost of 95% LTV deals falls, says Moneyfacts

Money

The cost of 95 per cent loan-to-value mortgage deals has fallen this month, in spite of the rates on other types of home loan ticking upwards, according to Moneyfacts.co.uk.

The comparison website found that the average two-year fixed rate at 95 per cent LTV has fallen from 4.11 per cent at the start of the month to 4.06 per cent, bucking the recent trend of rate rises.

The average five-year fixed rate for borrowers with a 5 per cent deposit has dipped from 4.49 per cent at the start of this month to 4.43 per cent today.

As a result, both rates are now lower than they were at this time last year.

Moneyfacts finance expert Charlotte Nelson says: “As the market was building up to May’s base rate announcement, the high LTV mortgages weren’t left untouched by the rate rises.

“However, since it was announced that base rate remains on hold, the rest of the market has continued on its upward trajectory, whereas the higher LTV products seem to be forging their own path.

She adds: “This is great news for first-time buyers, especially as they often bear the brunt of any rate rises in the market.

“Competition in this sector is high particularly among lenders looking to revitalise their mortgage book by bringing new borrowers on board.

“And it is not just rates providers are using to attract these new borrowers, as an array of different incentive packages and fees means borrowers can now tailor their mortgage to suit their needs.”

But Nelson says that it is still well worth borrowers saving the extra deposit to make it into the 90 per cent LTV threshold if at all possible.

She says: “By saving an extra 5 per cent for a deposit, first-time buyers will still be significantly better off. To illustrate, the average two-year fixed rate at 90 per cent LTV stands at 2.74 per cent today – meaning borrowers who can save the extra 5 per cent could save a whopping £141.82 a month (based on a £200,000 loan over 25 years).

“With rates still increasing in other sectors of the market, only time will tell how long the 95 per cent LTV tier can continue to buck this trend. So, borrowers considering getting on the property ladder should look at the options now before they miss out on the lower rates.”

“With rates still increasing in other sectors of the market, only time will tell how long the 95 per cent LTV tier can continue to buck this trend. So, borrowers considering getting on the property ladder should look at the options now before they miss out on the lower rates.”

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