Moneyfacts: Borrowers should consider deals outside of Mortgage Guarantee Scheme

Borrowers would be wise to consider deals outside of the government’s Mortgage Guarantee Scheme to ensure a wide choice of products, according to Moneyfacts.

Compared to the five deals available at 95% loan-to-value (LTV) earlier this year, choice for those with the smallest deposits has risen dramatically, as a total of 78 more options have appeared since the start of April, both within and outside of the Mortgage Guarantee Scheme.

Availability at 90% LTV has also improved, but remains a significant way off the 779 deals that were available pre-pandemic.

Cambridge reintroduces 95% LTV products

The influx of higher LTV deals has seen the average fixed rates for the top lending tiers drop since the start of this month.

At 95% LTV, the average 2 and 5-year fixed rates reduced by 0.45% and 0.15% respectively, but are 0.76% and 0.59% higher than in March 2020, prior to when we saw hundreds of options at 95% LTV withdrawn.

Average 2 and 5-year fixed rates at 90% LTV are 0.60% and 0.54% lower than those on offer to borrowers with just a 5% deposit available.

Moneyfacts revealed that borrowers could save thousands by stretching their deposit to 10% based on average rates today, saving up to £1,486 over two years and £3,379 over five years.

Eleanor Williams, finance expert at Moneyfacts, said: “As house prices and rents continue to climb, aspiring homeowners may have been waiting with bated breath for the launch of the government mortgage guarantee scheme, supporting those with small deposits to take on a mortgage.

“Approximately a week on since the biggest lenders launched products into the scheme, our analysis shows how this has impacted the sector and why borrowers may still be wise to look at deals outside of the scheme.

“Indeed, of the 112 deals now on offer at 95% LTV, 72 do not sit inside of the mortgage guarantee scheme.

“Affordability may remain a concern with borrowers regardless of the new scheme and generally consumers will find much more choice and lower rates if they can stretch their deposit to 10%.

“Whether borrowers need to put their immediate plans on hold to achieve this will depend on their circumstances of course.

“Borrowers ready to apply for a mortgage may need guidance as to whether they can meet eligibility criteria, such as with income multiples, employment status or indeed the property type.

“As the sector remains volatile and available options are changing with great regularity, it has likely never been more important for borrowers to secure up-to-date market knowledge to ensure they are able to consider the whole package and select the best possible mortgage for their circumstances.”