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Mortgage deposits ease as higher LTVs return to the market

06 November 2009 / by Rachael Stiles

The deposit required to secure a mortgage has fallen since the base rate was cut to 0.5 per cent in March, as lenders have strived to appear more accommodating by offering higher loan to value deals.

Market analysis from has found that the number of mortgages requiring a minimum deposit of 15 per cent have risen from 169 in March to 231, while home loans requiring a deposit of 10 per cent have risen from 89 to 105.

This will come as welcome news to those seeking first time buyer mortgages, many of whom had to put their dreams of homeownership aside when the housing market crash spelled the end of easy credit.

But, while LTVs might have risen, easing the pressure on mortgage customers to come up with large deposits, they have to pay for the privilege as mortgage rates have not followed suit, remaining relatively static since the base rate fell to its record low, where it still remains.

Yesterday, the Bank of England's Monetary Policy Committee voted for the eighth month in a row to hold interest rates at 0.5 per cent, but since March, only a handful of mortgage lenders have cut their rates and the average rate has not moved much, Moneyfacts' research found.

The average two year fixed rate mortgage currently costs 5.06 per cent, the same as it did in July, but this marks a rise from 4.84 per cent compared to what it cost in March.

Tracker mortgages, meanwhile, have become marginally cheaper, falling from 3.86 per cent in March to 3.76 per cent.

There is some home for homebuyers, as Bank of England data shows that total net mortgage lending rose slightly in September, by £0.7 billion, driven by a rise in house purchase activity. Meanwhile, the number of mortgage products available has risen from 1,431 to 1,564 since March, Moneyfacts found.

Commenting on the findings of the research, Darren Cook, spokesperson at, said that the figures were "encouraging" and suggest that lenders are "becoming more accommodating with their deposit requirements, which should give more opportunities to first time buyers to take advantage of a buyers market."

He added that as property values level out, lenders are becoming more "comfortable" with higher loan to values, but that this still comes at quite a high price.

"A few lenders have made cuts to their mortgage rates over the past few days, but these are too few to announce a formal return to healthy competition," he said. "It looks like lenders are trying to make an effort to increase their prudent appetite to lend, but we need to see more lenders trying to better each other on rates."

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