First-Time Buyers: 90% Mortgages Are Making A Comeback

The recent surge of the UK housing market led to more homes ‘changing hands’ in the last three months of 2020 than in any quarter in the past 13 years. This increased activity is reportedly tempting mortgage-lenders to return to the higher-risk areas of the market which they ran away from in the early days of the pandemic. 

For first-time buyers, this is brilliant news. It means that, with a 10% deposit, first-timers now have a much wider choice when choosing a lender. The Financial Times has reported that, this week, Santander re-entered the 90% loan-to-value (LTV) mortgage game for the first time since May 2020. 

Due to their growing confidence in a strong market, lenders have doubled the amount of the 90% LTV mortgages being granted, from 88 at the start of December 2020, to 215 this week alone. 

While this is good news for first-time buyers, we’re still a long way behind where we were before the pandemic hit. In early March 2020, lenders gave out 779 90% LTV deals.

Beware of interest rates

This good news does come with a word of warning. Low-deposit mortgages tend to come with very high rates of interest and this year they’re higher than they have been for a long time.

According to Moneyfacts, the average interest rate on a two-year fixed-rate 90% LTV mortgage is 3.61%. Last year, it was just 2.57%

Andrew Montlake, Managing Director at mortgage broker Coreco, said:

“You only have to look at what’s happened to house prices in the past 12 months and a lot of the lenders’ fears haven’t come to pass. After the stamp duty deadline we’ll probably start to see lenders increase their availability for 90 per cent LTV mortgages again and there may be a bit of a price war. We could see rates come down.”

If you have any questions about mortgages for first-time buyers, our in-house property expert, Russell Quirk, is happy to help. Drop us a message in the comments section below, and he will get back to you without delay.