by Mark Johnston
Mortgages for those with smaller deposits seem to be increasing in availability at the moment, thus bringing the hope of climbing on to the property ladder a little bit closer for some.
Banks are luring potential buyers with small deposits as a flurry of new deals hit the market.
Figures from financial analyst Defaqto shows that mortgages with a maximum loan to value (LTV) of 90% has risen recently. These mortgages have increased in availability from 9.6% of all loans a year ago to 12.7% currently. The percentage of mortgage deals with a 95% loan to value (LTV) ratio has also risen from 2.3% a year ago to 4.3%.
The number of mortgages aimed at borrowers with as little as a 5%deposit has more than doubled since June last year, with 63 now available on the current market. Mortgages for those with a 10%deposit have also rocketed by 54% in 2 years and there are now 264 deals of this kind on the market.
Mark Harris, from mortgage broker SPF private clients, said “there is now a greater choice of products at higher loan to value’s (LTV) compared with 12 months ago”.
Data shows that back in 2007 a potential borrower with a 10% deposit would have had approximately 1,815 deals to choose from.
David Hollingworth, spokesman for mortgage broker London and Country also added that “buyers with small deposits do have a good choice of loans now, although there are still far fewer available than there were in 2007”.
While it does seem that there has been a gradual rise in the number of higher loan to value (LTV) mortgage deals, there is still a significant premium to pay for these deals.
Buyers need to be aware that there has been some upward pressure on rates recently. A growing number of lenders are applying arbitrary increases to their standard variable rates (SVR). Therefore some experts believe it is worth acting sooner rather than later to secure one of the current rates, in case they rise further.
For those with a 10% deposit, the cheapest mortgages seem to be 2 year fixed rate deals.
First Direct offers a 2 year fixed deal at a rate of 4.19% with a £999 fee.
Those with a 10% deposit looking for longer fixed deals such as 5 years should consider theYorkshirebuilding society as they are offering a rate of 4.74% with a £995 fee.
At a glance there are a few leading lenders willing to offer deals to those with a 10% deposit. However, despite these competitive deals entering the market according to experts the vast majority of mortgage applicants with a 10% deposit are still turned down as they fail to meet the mortgage lenders strict criteria, meaning borrowers will also need an immaculate credit records in order to obtain one of these deals.
Lenders still view people with smaller deposits as high risk therefore they are still nervous about lending to this part of the market.
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