Borrowers have been treated to record low mortgage rates, but while rates remain at their lowest for those with large deposits, research from moneyfacts.co.uk shows that for those with a small deposit the trend seems to be reversing. In fact, the average two-year fixed rate at 95% loan-to-value (LTV) has increased by 0.10% since April and a shocking 0.35% since the start of the year.

Charlotte Nelson, Finance Expert at moneyfacts.co.uk, said:

“Despite providers competing to sit at the top of the Best Buy tables, it is clear to see that the wind is once again shifting around for those at higher loan-to-values. This is disappointing news for first-time buyers who have struggled to gather enough cash to put towards a deposit, only to now find rates are starting to rise.

“Borrowers looking for a two-year fixed rate at 95% LTV will find that monthly repayments will be £29.10* more expensive if they take out a mortgage today compared to the start of the year. This rate reversal is not just affecting two-year fixed rates, either, with the average five-year rate at 95% LTV increasing from its lowest ever point of 4.37% in January 2017 to 4.55% in July.

“The increase can be largely explained by the inflationary pressures the economy is facing. As inflation rises, borrowers’ incomes get eaten away and the probability of a borrower defaulting rises. The added speculation of a possible base rate rise in the near future has seen providers re-evaluate the lows that borrowers were starting to get used to.

“First-time buyers might feel like they can never catch a break, facing large deposits and now rising rates, but it is not all doom and gloom, with more deals on the market at current than at any time since the financial crisis.

“With the Bank of England scrutinising high LTV lending, this upward pressure on rates looks like it may continue. So borrowers looking for a deal at a higher LTV will need to act now if they want to make the most of low rate deals before their time is up.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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