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Derin Clark

Online Reporter
Published: 10/02/2020
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First-time buyers saving for a 5% deposit will be pleased to see that average five year fixed mortgage rates on a 95% loan-to-value (LTV) have fallen by 0.26% year-on-year, while average two year equivalent rates have fallen by 0.19%.


Research to be published in the Moneyfacts UK Mortgage Trends Treasury Report found that the average five year fixed mortgage rate on a 95% LTV was 3.78% in February 2019, while today the average rate is 3.52%. Meanwhile, the two year average fixed rate on a 95% was 3.41% in February 2019, while today it stands at 3.22%. In addition to this, there are currently 405 deals in the 95% LTV chart, its highest level since May 2019 when there were 413 products available.

Residential Mortgage Market analysis 

Average rates Feb 2015 Feb 2018 Feb 2019 Jan 2020
95% loan-to-value two-year fixed 5.04% 4.07% 3.41% 3.25%
95% loan-to-value five-year fixed 5.27% 4.48% 3.78% 3.56%

Source: Moneyfacts Treasury Report 

The increase in competition in the 95% LTV chart is not only good news for first-time buyers, but also benefits those looking to remortgage with just 5% equity in their home.

Traditionally, interest rates on a 95% LTV are higher than that offered on lower LTVs, as borrowing against a 5% equity is considered riskier lending and, in May 2019, the Bank of England’s Prudential Regulation Authority (PRA) warned mortgage lenders over the rise in risky lending practices. It seems that mortgage lenders are once again confident lending on a 95% LTV however, as Eleanor Williams, finance expert at Moneyfacts, said: “As our data shows, the market has picked up since the intervention by the PRA last year, with the average 95% LTV two and five-year mortgage rates falling by a notable amount. Indeed, the rates available now are much lower than they were two or even five years ago when the average 95% LTV mortgage was priced at over 5% for both sectors – good news for prospective borrowers.

“This seems to demonstrate that there continues to be competition among lenders in this ever-expanding section of the market. This may in part be due to lenders trying to attract the increasingly young first-time buyers, who they may then be able to keep on their books moving forwards as they remortgage over the years.”
Looking ahead, last month saw SWAP rates fall and, as a drop in SWAP rates often filters through to mortgage rates, it could result in average rates falling further. Williams added:

“Therefore, although last year’s economic uncertainty may have put some borrowers off taking out their first mortgage, or indeed tying themselves to a new deal, it seems that lenders are now actively competing to attract these customers, regardless of whether they are a first-time buyer or are looking to remortgage with a low level of equity.

“As with any financial commitment, it is vital that borrowers take into account the overall true cost of any deal and make sure that what they are committing to will be affordable over the long-term. Particularly with higher LTV products, talking with an independent financial adviser about the option to make overpayments in line with the lender’s boundaries may be a sensible precaution, and ensure they have an even wider pool of products available to them in the future.”

95% LTV mortgages

For the best 95% LTV mortgage rates visit our 95% LTV mortgage chart.

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