First time buyers encouraged by lenders offering 5% deposit mortgages
Monday 15 October, 2018
Thomas Oliver’s Mortgage Brokers, Vishal Gulrajani and Thomas Wheatley review the option of a 95% loan to value mortgage that suits first time buyers looking for a mortgage with a lower deposit.
There has been a lot of negative news surrounding the property market given Brexit. However there is some good news for anyone looking to buy a new house or move home because according to Moneyfacts the mortgage rate you pay on a 95% loan to value mortgage is at a record low. This is tremendous news considering the Bank of England raised the base rate in August.
Why are more mortgage lenders offering 95% loan to value mortgages?
What we are seeing, is due to the stabilisation in the property market, lenders are competing in other sectors to gain revenue. This has meant the number of lenders now providing 5% deposit mortgages has increased. According to Moneyfacts the number of lenders in this area of the market has increased to 58 which is 10 more than two years ago. Also within the mortgage market there are currently 345 individual 95% loan to value products available and more competition may encourage lower mortgage rates for these products. We may also see improved products which massively helps the average consumer, especially first time buyers.
Vishal Gulrajani, Mortgage Broker in Goff’s Oak & Cheshunt, Hertfordshire said:
‘It is very difficult for first time buyers to find enough money for a house deposit even if they are getting support from family and friends. This is why the greater diversity and completion at 5% deposit rates is so important. The average consumer is now not paying as bigger premiums as they were two years ago when they opt for a 95% mortgage compared to a 90% mortgage. However, this does not necessarily mean that you should choose a 5% deposit mortgage over a 10% or 15% deposit if you have the available funds. If you choose a product with a 10% or 15% mortgage deposit you will still have more lenders to choose from, a better mortgage rate and lower credit criteria maybe available. Remember a 5% deposit mortgage is still considered high risk for a mortgage lender and as a result you must have an extremely good credit record to get approval. Nevertheless the bigger issue is still the limited number of 95% mortgage products available if you want to re-mortgage. Therefore if your property hasn’t increased significantly in value when you come to re-fixing your mortgage you may be severely limited on the products you can apply for and you may have no option but to move to a lenders variable rate.’
Thomas Wheatley, Mortgage Broker in Tottenham, North London, said:
‘Overall the greater competition at higher loan to values is a massive bonus especially for younger first time buyers who are struggling to get a 10% deposit saved up. However consumers should be fully aware of the risks that may arise by taking out these mortgage products. Consequently it is always best to get mortgage advice from a qualified mortgage advisor because they can review the mortgage market on your behalf and recommend a variety of mortgage products and mortgage rates. If you contact one of our mortgage broking team at Thomas Oliver our mortgage advisors will review your individual financial circumstances to provide a personalised mortgage solution based on your needs and risk profile. Our mortgage advisers will discuss the 95% loan to value mortgages and decide if they are the most suitable product for you.’