Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Mortgage costs for low-deposit borrowers rises

LTV

The cost of a 90% LTV two-year fixed-rate mortgage has jumped by more than 28% between November 2019 and November 2020

The cost of borrowing for low-deposit borrowers has increased across all mortgage types over the last year, new data from Mortgage Brain has revealed.

The cost of a 90% loan-to-value (LTV) two-year fixed-rate mortgage has jumped by more than 28% between November 2019 and November 2020.

In monetary terms, this means the cost per £1,000 borrowed has grown from £4.06 to £5.22 over the year. This equates to an annual increase of £2,784 for a loan of £200,000.

Meanwhile, the cost of a three-year fixed-rate mortgage at 90% LTV has risen by 17.2% in the same period, equating to an increase from £4.31 to £5.05 per £1,000 borrowed. The cost of five-year fixed-rate mortgages at the LTV band has seen a more modest rise of 9.7%.

Borrowers at smaller LTV bands have also seen costs grow since last year. For example, the cost of a 60% LTV two-year fixed rate has grown 2.69% from £3.71 per £1,000 borrowed, while the cost of a three-year fixed rate at the same LTV band has jumped to £4.24 from £3.98 per £1,000 borrowed.

However, the mortgage expert says there is good news for borrowers looking at five-year fixed rates. Mortgage costs at 60%, 70% and 80% have all dropped over the last 12 months, by 4.95%, 3.42% and 3.80% respectively.

Neil Wyatt, sales and marketing director at Mortgage Brain, comments: Lenders have understandably taken a more cautious approach to their product ranges due to the operational and potential economic impacts that have been experienced as a result of the Covid-19 pandemic, and that’s been seen most clearly with the products on offer to borrowers with a deposit of just 10%.

Not only has there been a significant reduction in the availability of these products, but the costs of the products that are on the market have increased to a striking extent. It’s not just those with small deposits that face higher costs than a year ago though. In fact, it’s only five-year fixed-rate mortgages which have seen costs fall over the last 12 months.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.