Average 90% LTV mortgage rates fall for 3rd consecutive month state The Bank of England

Mortgage rates for borrowers with a 10% deposit have fallen from 3.75% in December and 3.65% in January, driven down by more lenders re-joining the higher LTV lending market.

This compared to February 2020 when the average interest rate was 1.97%, 90% rates still remain high.

A borrower with a £150,000 mortgage over 25 years, excluding fees, paying 1.97% for two years would pay £634 a month, and £15,216 over the two years.

With the current average rate of 3.5% the monthly payment would be £117 higher and with an additional £2,808 due over the two-year product term.

Average 95% LTV deals, which are currently only being offered by small regional building societies to local applicants, or by high street banks to their existing borrowers, stand at 4.14% after gradually falling from 4.2% in December.

Mortgages for borrowers with a 5% deposit will soon become more commonplace once again, following the chancellor’s Budget unveiling of a 95% government-backed mortgage guarantee scheme.

Rishi Sunak said the HSBC, Santander, Barclays, NatWest and Lloyds had all agreed to release 95% mortgages next month, with products expected to hit the shelves from mid-April. Virgin Money is set to follow in May.

Anthony Codling, chief executive of Twindig, a property platform, said: “It will be interesting to see what impact the government mortgage guarantee scheme has on 95% LTV mortgage rates.

“Current two-year fixed rates of 4.14% are more than 2.5 times higher than that of a 75% LTV two-year fix.

“With the stamp duty holiday extension likely to lift house prices further, the government mortgage guarantee has to lead to a significant reduction in mortgage rates for those with low deposits otherwise it won’t be worth the paper it’s written on and those it was intended to help, generation rent, will continue to struggle to get a foot on the housing ladder and remain a generation of renters not buyers.”