Large deposits no longer needed to get the best mortgages

Lenders are getting more relaxed about what you can put down as a deposit!

It wasn't that long ago that all of the best mortgages were reserved for those with a 40% deposit.

Lenders were targeting remortgagors with plenty of equity in their homes because they provide the lowest risk of defaulting and of falling into negative equity. With little to lend, the banks and building societies wanted the 'cleanest' business they could get.

But the good news is that many lenders are starting to make more products available at higher loan-to-value (LTV) ratios again, for those without enormous deposits.

Let's not get carried away, the market is nothing like it was pre-crunch, and there is still a very limited range for those with just 10% of their property's value as a deposit or equity. But things are getting better every week.

How much better?

Lenders are launching more high LTV products for those with small deposits, according to financial information provider Moneyfacts.

It says that since Base Rate reached 0.5% on the 5th March the number of products that require a 15% deposit has risen from 169 to 231. And the number of products requiring just 10% upfront has gone up from 89 to 105 in the last month alone.

OK the market isn't exactly swarming with mortgages for first-time buyers and remortgagors with small deposits -- but it's certainly better than it was six months ago.

Who has done what?

Last week Nationwide announced a wide range of new deals, many of which are now available up to 85% LTV -- for those with just 15% upfront. Plus the lender's best rates are now available up to 70% not 60% LTV.

For example, the lender's two-year tracker at 2.78% and its two-year fix at 3.78% are both attractive rates, if not quite market leaders. In addition, Nationwide has launched a new 90% LTV range specifically for purchasers who hold its Flexaccount current account. Rates start at 4.63% for a two-year tracker with a £995 fee, and the deals are only available through branches.

This week Woolwich have launched a new range of products up to 75% loan-to-value, the first time the lender has gone up to this LTV tier for over a year. The new range includes a lifetime tracker at 2.94% and a two-year fix at 3.99%, both with a £999 fee. Woolwich has also made its best rates available at 70% not 60% LTV. And it has cut its market-leading term tracker rate this week to just 2.77% with a £999 fee.

Abbey has also just announced a new range of mortgages exclusively for its current account customers (and those of sister lender Alliance & Leicester). One deal is available up to 90% LTV -- a three-year fixed rate at 5.99%. But it can be matched on the wider market so it's only worth switching your current account if you want Abbey's leading 6% in-credit interest rate. Abbey's cheapest mortgages are also now available at 70% not 60% LTV.

And finally, Leeds, Ipswich, Nottingham and Tipton & Coseley Building Societies have all recently increased their maximum LTV, according to Moneyfacts -- Nottingham now lends up to 80% and the rest up to 85% LTV.

Why are lenders loosening criteria?

Lenders clearly feel that property values are leveling out (or even on the up) as they are willing to advance a greater proportion of the property's value as a mortgage, and accept less equity. Not only are an increasing number of deals at 80% and 85% coming onto the market, but last month HSBC pledged to lend an extra £500m at 90% LTV before the end of the year.

Some experts have also pointed out that after larger lenders chopped rates during October, others may have felt it was better for them to offer deals at higher LTVs than try to compete on pricing at the lower LTV tiers.

Underlying this is the political pressure for lenders to make more competitive deals available to consumers, and leading the march last month was Government-owned lender Northern Rock.

Best buys at each LTV

Up to 60% LTV

*Remortgage only

Up to 70% LTV

**£595 fee for purchase customers only, remortgagors pay £995

Up to 75% LTV

Up to 85% LTV

Up to 90% LTV

*first-time buyers only

Get help from lovemoney.com

If you need help getting the best mortgage use our resources.

First, adopt this goal: Cut the cost of your mortgage and pay it off early

Next, watch this video: Getting through the mortgage maze

Then, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 4045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term will revert to the lender's standard variable rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

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