Boost for first-time buyers as 80 new 5% deposit mortgages launched in last month

Help for first-time buyers as 80 new 5% deposit mortgages launched last month – but borrowing is still more expensive than pre-pandemic

  • Lenders have launched 80 new 5% deposit mortgages in the last month
  • They are once again catering to first-time buyers after rescinding deals in 2020
  • Rates are falling slightly with typical two-year fix at 3.88% and five-year fix 4.07%
  • Borrowers still only have half the options they did pre-pandemic 

Mortgage options for borrowers with smaller deposits have improved drastically, after 80 new 5 per cent deposit deals were made available in the last month.

More 5 per cent deposit mortgages were launched in May than any other type of home loan, as lenders increasingly look to cater to first-time buyers.

There are now 192 products on the market, compared to just 31 in June 2020, according to financial information service Moneyfacts. 

On the ladder: Better mortgage availability could help first-time buyers purchase a home

Many lenders stopped offering low-deposit deals at the onset of the pandemic because of concerns about their own capacity to deal with applications and about borrowers’ financial security.

Those are now starting to return, thanks in part to the Government offering to underwrite 5 per cent mortgages for lenders in a new guarantee scheme. 

However, there are still far fewer deals available than pre-pandemic. In June 2019, for example, there were 404 options to choose from.

Rates have also fallen marginally, with two-year fixes dropping from 4.02 per cent in May 2021 to 3.88 per cent today, and five-year fixes falling from 4.17 per cent to 4.07 per cent.

However, they have not hit the lows of two years ago when a two-year fix could be secured with a 3.25 per cent rate and a five-year fix at 3.67 per cent.

Mortgage market: There are now more than 4,200 home loan deals to choose from

Mortgage market: There are now more than 4,200 home loan deals to choose from 

For those with slightly bigger cash pots, there were 11 new 10 per cent deposit mortgages launched in May, bringing total deals to 492.

The average rate on those was 3.37 per cent for a two-year fix and 3.42 per cent for a five-year fix – again significantly higher than the 2.64 per cent and 3.03 per cent in June 2019.

Overall, the number of available mortgages has risen for eight months in a row and is now at the highest level recorded since the start of the pandemic.

Top 5% deposit mortgages 

Two-year fix 

Hinckley & Rugby Building Society is offering a two-year fixed-rate mortgage at 3.39 per cent with a £999 fee

Natwest has a two-year fixed rate at 3.65 per cent with no fee 

Virgin Money is offering a two-year fix at 3.79 per cent with £25 cashback 

TSB has a two-year fix at 3.94% with £500 cashback 

Five-year fix 

Hinckley & Rugby BS has a five-year fix at 3.69 per cent with a £999 fee 

Natwest is offering a five-year fix at 3.89 per cent with no fee 

Coventry Building Society has a five-year fix at 3.79 per cent with a £999 fee 

The West Brom is offering a five-year fix at 3.94 per cent with no fee

Compare all the available deals using the This is Money mortgage service 

Lenders have responded to the recent housing market boom by offering enticing deals to draw in borrowers – especially those with higher deposits who can access rates as low as 0.99 per cent.  

There are now more than 4,200 total mortgage deals available, just 700 fewer than two years ago. 

Deals are not sticking around for long, however. The typical mortgage is available for just 28 days, a week less than it was two years ago.

Borrowers with higher deposits or equity are currently enjoying far lower rates than those with less. 

The average two-year fixed rate for someone with a 40 per cent deposit or equity is now 1.61 per cent, substantially lower than the 1.91 per cent in June 2019. 

On a five-year deal the typical rate is 1.81 per cent, again much lower than 2019’s 2.26 per cent.  

Eleanor Williams, finance expert at Moneyfacts, said: ‘Homeowners’ aspirations to acquire larger living space and to make the stamp duty holiday deadline has pushed up UK house prices and while the demand for a dwindling supply of property continues to increase, there has been a notable surge in mortgage borrowing. 

‘Lenders are reacting by improving product choice, with 316 more products now on offer compared to last month, seeing overall mortgage availability top 4,000 products for the first time since the pandemic’s impact began over a year ago.  

‘As well as changes in the top loan-to-value tiers, rate competition has become evident at the opposite extreme of the LTV spectrum, with a number of lenders launching eye-catching sub-1% mortgage deals in the lowest LTV brackets. 

‘These record-low rates are available to low-risk borrowers with high levels of equity, but as to whether this competition will extend to higher-LTV deals remains to be seen as we navigate the full economic impact of the last year.’

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