Good news for first time buyers as lenders allow smaller deposits

First time buyers with just a 10 per cent deposit - for long almost excluded from the mortgage market - now find many more lenders competing for their business.

Independent mortgage market monitor Moneyfacts says the number of mortgages overall available at 90 per cent Loan To Value  has risen by 29 in the first two weeks of February alone. This follows 88 additional products coming on to the market in January. 

The current total is 277 and while a long way off the 776 deals available a year ago, it’s well above the low of 44 deals offered in early September when worries about the pandemic caused lenders to tighten their belts.

The number of different lenders who offer 90 per cent LTV mortgages overall has also risen – by five since the start of this month, and by 15 since the beginning of January.

First time buyers with a 10 per cent deposit will also find more cashback offers on the market today, rising from 50 to 83 over the past month.

Eleanor Williams, spokesperson for Moneyfacts, says: “As the stamp duty holiday deadline approaches, RICS latest research indicates that January has seen the first fall in residential activity in seven months.

“First time buyers who found themselves unable to proceed last year, and who may not be impacted by the end of the stamp duty holiday if they are purchasing below a property value of £300,000, could buck this trend, as there may be good news for those ready to take their first step on the property ladder.

“While average rates – historically often higher than those available in lower LTV brackets due to risk – are above where they were a year ago, those for whom the longer-term stability of a five-year fixed may suit their circumstances may be pleased to note this rate has reduced 0.04 per cent since the start of this month alone.

“There are of course still hurdles for these borrowers to overcome; house prices inflated quite significantly last year – although early indications are this may be slowing in 2021 – and savings rates have continued to descend to rock bottom lows, making building a larger deposit difficult, as have high rental payments. But their options have been steadily increasing.”