Nationwide has sliced half a per cent off a range of its 95 per cent loan-to-value mortgages in a bid to attract the growing range of first-time buyers.
Despite multiple interest rate rises, a housing shortage, warnings of a property price plunge and Brexit uncertainty, the number of people buying houses for the first time keeps going up.
Last year, almost half of all house purchases financed by a mortgage were made by first-time buyers, the highest level since 1996.
But since 1996, wages have grown by 22 per cent while house prices are up 152 per cent – causing the average house price for first-time buyers to skyrocket to £209,000, with average deposits hitting £33,1272.
95% mortgages have never been lower, making it cheaper for first-time buyers to borrow
For those who can’t rely on the bank of mum and dad to bump up the size of their deposit, it can seem tough out there.
However, there is a growing list of increasingly cheap options: mortgage lenders are slashing rates for those with a 5 per cent deposit to their lowest levels on record.
The average two-year fixed-rate 95 per cent loan-to-value mortgage is now 3.72 per cent compared to 4.21 per cent last year, according to Moneyfacts.
And the average five-year fixed-rate 95 per cent loan-to-value mortgage now stands at 4.06 per cent, down from 4.50 per cent in October last year.
The range of choice available to those after this type of mortgage is also growing – the number of deals has grown from 319 in October last year to 335 today.
Charlotte Nelson, mortgage expert at Moneyfacts, said: ‘The 95 per cent loan-to-value market is seeing a boom at the moment not only with more products on the market but ever lower mortgage rates as well.
‘Providers are keen to show that they are willing to lend to this group of borrowers not only for the positive message but to rejuvenate their mortgage books.
‘With mortgage rates falling, borrowers looking for a 95 per cent LTV mortgage have a great opportunity to get a lower cost deal than ever before.’
| Oct-17 | Apr-18 | Oct-18 | |
|---|---|---|---|
| Average two-year fixed (95 per cent) | 4.21 | 4.01 | 3.72 |
| Average five-year fixed (95 per cent) | 4.50 | 4.44 | 4.06 |
| Number of products at 95 per cent | 319 | 291 | 335 |
The latest lender to cut rates is Nationwide, which has dropped its 95 per cent loan-to-value rates by up to 0.50 per cent.
Rates start at 2.99 per cent for the building society’s two-year tracker with a £999 fee and 3.39 per cent with no fee, a reduction of 0.50 per cent.
Three and five-year fixed rates at 95 per cent LTV have also been reduced, with the three-year fixed rate starting at 3.59 per cent with a £999 fee and 3.89 per cent with no fee, while the five-year fix is 3.74 per cent with a £999 fee and 3.94 per cent with no fee.
At the same time, the maximum loan size at 95 per cent LTV has been increased from £350,000 to £500,000 for all house purchase transactions, including for first-time buyers.
Henry Jordan, Nationwide’s director of mortgages, said: ‘The changes announced today offer competitive rates for those with small deposits and are aimed at particularly supporting first-time buyers, as well as those living in areas with higher property values.’
Mortgage valuations are fee-free, while first-time buyers receive a £500 cashback to help with costs and those remortgaging to the society can choose between £500 cashback or free standard legals.
Though Nationwide’s rates are low, there are a few cheaper deals out there. The Nottingham Building Society has a two-year fix at a rate of 2.94 per cent with a £999 fee, while Halifax’s deal starts at 2.95 per cent with a £1,199 fee.
For five-year fixes, digital provider Atom Bank has five-year fix at 3.44 per cent with a £220 fee, while Monmouthshire Building Society has a five-year fix at 3.48 per cent with £250 cashback.
On a £190,000 mortgage taken over 25 years, taking Nationwide’s two-year deal would result in total interest charges of £81,003 and monthly repayments of £900.
Rates start at 2.99 per cent for Nationwide Building Society’s two-year tracker with a £999 fee
By comparison, on the same mortgage terms Nottingham’s deal would result in total interest payments of £79,524 and monthly repayments of £895 – a saving of £5 a month.
Taking Nationwide’s five-year fix on a £190,000 mortgage over 25 years would result in total interest repayments of £103,743 and monthly repayments of £976, while Atom Bank’s five-year deal would cost £93,744 in interest total payments and monthly repayments of £945 a month.
For those wanting a variable rate, Skipton Building Society has a deal starting at base rate plus 2.24 per cent for two years, currently at 2.99 per cent, with no fee. This would cost £80,004 in total interest repayments on a £190,000 mortgage over 25 years, and have monthly repayments of £900.
Leek United Building Society has a 2.95 per cent discount for two years, currently at 2.74 per cent, with £500 cashback.
On the same mortgage terms this would result in total interest repayments of £78,320 and monthly repayments of £895.
If you’re confused as to whether a fixed rate or variable mortgage is right for you, click here for our guide on the pros and cons of each.
Charlotte Nelson said: ‘Nationwide Building Society’s 2.99 per cent two-year tracker is highly competitive improving its position within its sector and sits among the lowest deals in the sector.
‘This is likely to be a great choice for borrowers looking to keep monthly repayments low however as this product tracks base rate the rate may rise if base rate increases.’
You can search for similar or cheaper deals using This is Money’s mortgage finder tool, and calculate the true cost of a mortgage by using our new and improved mortgage calculator.
You can also click here to find an independent financial adviser near you.