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Low deposit mortgages make a resurgence

Loan deals tend to be around for 27 days before becoming fully subscribed, compared with a historic average of 30 days

Low-deposit mortgages are making a “strong resurgence”, but there are not enough deals around generally to satisfy homebuyer demand, according to financial data provider Moneyfacts.

The choice of residential mortgages on offer has increased over the past 12 months from 2,527 to 3,180, with 90% and 95% loans making notable comebacks. But deals tend to be around for just 27 days before becoming fully subscribed, compared with a historic average of 30 days.

Moneyfacts found 49 mortgages available at 95% loan-to-value (LTV) – more than double the 24 recorded in January 2011, and a huge leap from the three found in April 2009. There are also 280 deals on offer at 90% LTV – a rise from 199 in January last year and 72 in April 2009.

“Best-buy” deals open to those who can only manage a 5% deposit include a three-year fixed-rate mortgage from Mansfield building society at 5.49% (£999 arrangement fee, maximum loan £200,000), and a five-year fix from Skipton building society at 5.99% (£195 application fee, maximum loan £300,000).

The low-deposit deals could offer signs of hope for first-time buyers, for whom the current stamp duty holiday on house purchases up to the value of £250,000 is due to end on 24 March.

However, there are concerns banks and building societies will tighten their criteria this year amid the weak economic backdrop, meaning borrowers will face a tougher challenge to meet mortgage conditions in the first place. The LTV tier with the biggest choice of mortgages is 60%, with 393 deals found – up from 271 in January 2011 and 280 in April 2009.

“First-time buyers are always going to struggle to find an often unrealistic 40% deposit, so thankfully we are seeing the 90% and 95% LTVs start to return to the market,” says Moneyfacts spokeswoman Sylvia Waycot. But she adds: “A lot of providers still prefer the assurance of a proven track record, which is shown by some of the incentives offered to those remortgaging such as free legal fees, free valuations or cashback.

“Despite an increasing number of mortgages appearing on the market, they are only around for an average of 27 days before being fully subscribed, which just goes to show there are still not enough mortgage deals around to satisfy demand.”

Moneyfacts says the improved figures remain a “far cry” from the choice available before the financial crisis, with nearly 12,000 deals offered in 2007. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds