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First-time buyers save £2,000 as 95% LTV rates plunge

First-time buyers are £2,000 better off thanks to a sharp drop in rates on 95% LTV mortgages over the past two years.

New buyers can choose from a growing number of mortgage deals at ever more affordable rates, according to new research from Moneyfacts.co.uk.

There are now 195 mortgages at 95% LTV, a sharp increase on 42 two years ago in August 2013.

The average two-year fixed rate at 95% LTV now charges 4.43%, down from 5.37% one year ago, and 5.67% two years ago.

And the cheapest two-year fix has fallen to 3.49%, well below the 5.42% charged in August 2013.

High-LTV rates have also fallen on five-year fixes. The average five-year fixed at 95% LTV cost 5.59% one year ago but just 4.86% today.

Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “It’s fantastic news that first-time buyers are finally seeing the improvement in the mortgage market that they have craved for so long.”

She said the launch of the Help to Buy Mortgage Guarantee scheme acted as a starting gun for this sector by making it acceptable to lend at higher LTVs.

“Once these deals hit the market, other providers outside of the scheme had no alternative but to compete to attract customers.”

Nelson said rates have dropped so much that a first-time buyer would be more than £2,000 better off in the first year by opting for the lowest two-year fix today compared with the lowest rate in August 2013.

“Those looking for a 95% mortgage would be wise to look at the whole market instead of focusing on just Help to Buy, as better deals can often be found outside of the scheme.

“The average five-year fixed Help to Buy mortgage charges 5.12%, whereas the average for those outside of the scheme is just 4.78%.

“However, borrowers will need to bear in mind that while they may be able to afford the mortgage deal now, with the Mortgage Market Review firmly in place they must prove that they can afford the mortgage after any base rate rises.”

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