"This is positive to see, but there is still lots of room for more deals to be pushed out in this area of the market as it represents just 6% of all deals available to borrowers across fixed and variable mortgages. "
- Rachel Springall, finance expert at Moneyfacts
The availability of mortgage deals at 95% LTV has risen to its highest point in almost five years, the latest Moneyfacts data shows.
The number of deals in the 95% LTV tier now stands at 388, its highest point since March 2020 (391).
Moneyfacts' data shows that across all LTVs, product choice overall fell month-on-month, to 6,451 options, but remain substantially higher than a year ago (5,787).
The average shelf-life of a mortgage product rose to 36 days, from 21 days a month ago.
Average mortgage rates on the overall two and five-year fixed rates rose by 0.04% and 0.07% to 5.52% and 5.32% respectively.
At the start of February 2024, the average five-year fixed rate was 5.18%; compared to the start of this month, the rate is 0.14% higher at 5.32%. However, the average two-year fixed rate has fallen by 0.04% over the same period, down from 5.56% to 5.52%.
The average two-year fixed rate is 0.20% higher than the five-year equivalent but the gap is at its lowest margin since January 2023 (0.16%). The two-year fixed rate has now been higher than the five-year equivalent since October 2022.
In February the average two-year tracker variable mortgage rate fell to 5.46% and the average SVR fell to 7.78%, down from a height of 8.19% during November and December 2023.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers with a limited deposit may find it encouraging to see a growth in choice for mortgages available at 95% loan-to-value, now at its highest count in almost five years. There are now 388 options available, the highest level since March 2020, when there were 391 deals. This is positive to see, but there is still lots of room for more deals to be pushed out in this area of the market as it represents just 6% of all deals available to borrowers across fixed and variable mortgages. Despite rising choice, average rates across a two or five-year fixed deal at 95% loan-to-value are higher than at the start of 2025. Overall product availability across the mortgage spectrum fell, but the average shelf-life of a deal rose month-on-month, which was largely expected due to the festive period when there are typically fewer changes from lenders.
“Lenders have been urged to do more to support first-time buyers, to boost growth in the economy, thus the debate on the loosening of lending rules. Therefore, there is an expectation for more products and innovation to emerge this year. However, the current rules will continue to pose a challenge for lenders to do more, as has been the case for the past 10 years where regulatory recommendations stipulate loan-to-income ratios of 4.5 or more do not exceed 15% of a lender’s new lending. Until lenders see a relaxation to these rules, some will have no choice but to pose limitations on those borrowing at higher loan-to-value tiers. Regardless of whether these rules change or not, there will be borrowers hoping to finish up their purchase before the stamp duty deadline at the end of March 2025.
“There has been a drop in swap rates over the past few weeks, but it can be a slow and steady process for lenders to move in the same direction. Borrowers may then be disheartened to know that fixed rates are not too dissimilar to what they were a year ago, with longer-term fixed rates somewhat higher. In truth, it can take a few weeks for lenders to catch up to a change in course on future rate expectations, or indeed to pass on reductions from any Bank of England base rate cuts, as the latter would be more immediately beneficial to borrowers sitting on a linked tracker rate. However, inflation is expected to rise in the coming months, which in turn makes it less likely for more base rate cuts. This will frustrate the millions of borrowers looking to remortgage in 2025 who plan to secure a fixed rate mortgage for peace of mind.”
