Mortgage gap closes as high-LTV loans get cheaper

The gap between mortgage rates at different LTVs has narrowed dramatically, making life easier for borrowers with small deposits.

Mortgage rates for borrowers with 10% deposits and 35% deposits are now at theirA closest in five years, according to new research from Yorkshire Building Society.

The difference between the average two-year fixed-rate mortgage at 90% LTV and 65% LTV has fallen to less than 1%.

The average two-year fix at 90% LTV now charges 3%, the lowest rate for five years, against 2.03% at 65% LTV.

The difference in monthly repayments is now equivalent to just £73 for borrowers with an average £150,000 loan, compared to £208 five years ago.

Back in 2011, the average two-year fixed rate at 90% LTV was 6.40%, against 4.04% at 65% LTV.

Brendan Gilligan, mortgage product manager at Yorkshire, said: “The general downward trend of mortgage rates over the past five years has been great news for borrowers, but particularly first-time buyers, who tend to have smaller deposits which require higher LTV mortgages.

“As our research shows, the difference in interest rate for mortgage borrowers with a 10% or 35% deposit has shrunk to less than 1%, which is pretty staggering.

“A lower mortgage rate can make a huge difference to your monthly repayments, but borrowers should also bear in mind the true cost of the mortgage, as products fees, legal costs and valuations can add significantly to the total a borrower pays over the fixed term of the mortgage.”