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More mortgages for smaller deposits
There are now a third more mortgages available to people with deposits of between 5% and 10%, according to new figures from financial website Moneyfacts.
There are now 443 mortgage products available to people with lower deposits.
And figures from the Council of Mortgage Lenders show that the typical deposit needed by a first-time buyer has dropped from 20% to 17%.
However, the vast majority of new mortgages are for people with 10% deposits.
Why are more mortgages becoming available?
The Government’s Funding For Lending scheme has been one of the main drivers behind this increase in mortgage products. The scheme allows lenders to borrow money cheaply, providing they then lend this money out to borrowers.
This has caused both an increase in availability and a drop in rates.
Rates dropping
The average rate on a five-year fixed rate mortgage for someone with a 10% deposit has dropped from 5.60% a year ago to 4.92% now, according to Moneyfacts.
Meanwhile, borrowers with a 5% deposit looking for a five-year fix will pay an average interest rate of 5.13%, down from 5.82% this time last year.
Mortgages with a 5% deposit
If you can only raise a 5% deposit, you’ll probably need some Government help, particularly if you’re a first-time buyer.
If you’re moving home, you can take advantage of Nationwide’s Save to Buy scheme. First, you need to open a Save to Buy savings account with Nationwide. Once you’ve had the account for six months and paid in regular deposits, you’re eligible for a mortgage of up to 95% of a home’s value.
Or you could try your local building society, as many offer 95% mortgages to first-time buyers. However, you may find that parents are required to put down up to 20% of the value as a guarantee.
In terms of Government help, there’s the Help to Buy scheme in England, which offers a loan of up to 20% of a new-build property’s value, repayable when the property’s sold. The loan is interest free for the first five years you own the home.
Or there’s the NewBuy scheme, where you can borrow up to 95% of the value of a new-build home, with the Government and the builder guaranteeing the mortgage.
Both schemes are open to people looking to move home as well as first-time buyers.
The following leading high street banks and building societies have already signed up to Help to Buy:
Barclays (through its Woolwich brand)
Halifax
Nationwide
NatWest
Santander
[Do we really need more Help to Buy?]
Mortgages with a 10% deposit
If you have 10% of your new home’s value to put down, you’re in a much better position. Fixed rates are by far the most popular of the mortgage options right now, and they’ve had their rates cut the most.
Here are some of the top mortgages right now across various fixed rate periods and with different levels of fees. We’ve used a 25-year repayment mortgage for these examples. Let's start with two-year fixes:
Mortgage provider | Initial rate | Fees | Early repayment charge |
3.59% | £1,499 | 2% reducing to 1% until 30/11/15 | |
Skipton BS | 3.99% | £125 | 3% reducing to 2% until 31/7/15 |
4.04% | £295 | 2% reducing to 1% for 2 years |
And here are rates for three years:
Mortgage provider | Initial rate | Fees | Early repayment charge |
Nottingham BS | 4.29% | £140 | Six months’ mortgage interest to 1/9/16 |
Leeds BS | 4.29% | £398 | 4% reducing to 2% at end of fixed period |
4.39% | £0 | 3% for three years |
And over five years:
Mortgage provider | Initial rate | Fees | Early repayment charge |
Nottingham BS | 4.39% | £439 | Six months’ mortgage interest to 1/9/18 |
4.49% | £599 | 5% reducing to 1% at end of fixed period | |
4.69% | £295 | 4% reducing to 1% at end of fixed period | |
4.75% | £0 | 5% until 31/8/18 |
Always make sure you shop around for a mortgage and look at the overall cost, not just the initial interest rate.
[See the latest mortgage rates and get expert advice]
This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker, before acting on anything contained in this article.
