Significant growth in mortgage costs for low-deposit borrowers – study

Significant growth in mortgage costs for low-deposit borrowers – study


Todays other news
Consensus remains that the Bank of England will cut rates...
Average house prices are set to increase by £84,000 over...
The government’s Budget could have serious implications for the housing...
There was a 5.4% rise in buyers instructing a home...
First-time buyers across 31% of local authorities in England will...


The cost of borrowing for low-deposit borrowers has increased across all mortgage types over the last year, new data from Mortgage Brain has revealed.

The cost of a 90% loan-to-value (LTV) two-year fixed-rate mortgage has jumped by more than 28% between November 2019 and November 2020.

In monetary terms, this means the cost per £1,000 borrowed has grown from £4.06 to £5.22 over the year. This equates to an annual increase of £2,784 for a loan of £200,000.

Meanwhile, the cost of a three-year fixed-rate mortgage at 90% LTV has risen by 17.2% in the same period, equating to an increase from £4.31 to £5.05 per £1,000 borrowed. The cost of five-year fixed-rate mortgages at the LTV band has seen a more modest rise of 9.7%.

Borrowers at smaller LTV bands have also seen costs grow since last year. For example, the cost of a 60% LTV two-year fixed rate has grown 2.69% from £3.71 per £1,000 borrowed, while the cost of a three-year fixed rate at the same LTV band has jumped to £4.24 from £3.98 per £1,000 borrowed.

However, the mortgage expert says there is good news for borrowers looking at five-year fixed rates. Mortgage costs at 60%, 70% and 80% have all dropped over the last 12 months, by 4.95%, 3.42% and 3.80% respectively.

Neil Wyatt, sales and marketing director at Mortgage Brain, comments: “Lenders have understandably taken a more cautious approach to their product ranges due to the operational and potential economic impacts that have been experienced as a result of the Covid-19 pandemic, and that’s been seen most clearly with the products on offer to borrowers with a deposit of just 10%.”

“Not only has there been a significant reduction in the availability of these products, but the costs of the products that are on the market have increased to a striking extent.”

He adds: “It’s not just those with small deposits that face higher costs than a year ago though. In fact, it’s only five-year fixed-rate mortgages which have seen costs fall over the last 12 months.”

Share this article ...

Join the conversation: Login and have your say

Recommended for you
Related Articles
Consensus remains that the Bank of England will cut rates...
Average house prices are set to increase by £84,000 over...
First-time buyers across 31% of local authorities in England will...
Mortgage rates are likely to rise as a result of...
Bad news - the Bank of England is widely expected...
Mortgage rates are likely to rise as a result of...
Mortgage advisers see a difficult few months ahead for the...
Recommended for you
Latest Features
Consensus remains that the Bank of England will cut rates...
Average house prices are set to increase by £84,000 over...
The government’s Budget could have serious implications for the housing...
Sponsored Content
Historically second charge mortgages or secured loans as they are...
Lenders must say what they mean and mean what they...
Fraudsters attacking the conveyancing sector, successfully stealing large sums of...

Send to a friend

In order to send this article to a friend you must first login. Click on the button below to login or sign up.

No one likes pop-ups ...
But while you're here