21 April 2021

Lenders launch 95 per cent mortgages as property market soars

The government mortgage guarantee scheme kicks off in earnest this week with several lenders launching 95 per cent loan-to-value (LTV) deals. This is a great opportunity for all borrowers with modest deposits, not just first-time buyers or those looking for a new-build property, as the scheme is open to home movers and those buying older properties costing up to £600,000 as well.

With house prices surging £20,000 on average over the past year, according to the Office for National Statistics, trying to find a deposit to buy a property is only going to get more difficult. With 95 per cent LTV mortgages disappearing during the pandemic because lenders regard them as higher risk, their return will be welcomed by those with small deposits, particularly in London and the southeast where values tend to be higher than elsewhere in the country.

Several lenders including Lloyds, Santander, Barclays, HSBC and NatWest have launched 95 per cent mortgages this week under the government scheme, with Virgin Money following next month. Others, including Accord and Coventry Building Society, are also offering 95 per cent but without the backing of the guarantee scheme, so it can be confusing for borrowers to know which product to opt for.

Most products are priced around the 4 per cent mark, with Halifax offering a marginally cheaper two-year fix (3.73 per cent) than the others, although it has a £999 fee and this can’t be added to the loan if it takes the LTV above 95 per cent. Meanwhile, Santander is offering a three-year fix pegged at 3.99 per cent with no fee.

Looking at longer-term, five-year fixes, most of the products on offer are within 25 basis points of each other, whether government-backed schemes or not. Coventry BS leads the way with a five-year fix pegged at 3.89 per cent.

But while there is not much to choose between the products in terms of pricing, there is divergence across some criteria and policy employed. For example, maximum loan sizes, property and buyer type restrictions. and so on. Borrowers should seek advice from a broker as to the best product for their circumstances.

It is also worth remembering that if a borrower has the ability to find a further 5 per cent deposit, then rates at 90 per cent LTV start from 3 per cent for a two-year fix and 3.3 per cent for a five-year fix.

Our mortgage brokers can all be reached via their usual phone numbers and email addresses. They are available to assist you and your clients at all times, even if you just want to have a chat about the market in general.

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