High LTV deals offer biggest savings: Mortgage Brain

High LTV deals offer biggest savings: Mortgage Brain

First time buyers or borrowers with a 10 per cent deposit have the pick of the most mortgage rate current reductions, according to Mortgage Brain’s quarterly product analysis.

As of 1 July, the mortgage sourcing firm’s data showed the cost of a two-year fixed rate with a 90 per cent loan-to-value is now 6 per cent lower than it was this time last year.

With a current rate of 2.79 per cent over two years, the reduction in cost for this product equates to a potential annual saving of £504 on a £150,000 mortgage.

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A 90 per cent LTV two-year tracker - at 2.54 per cent over two years - has also seen a 6 per cent reduction in cost over the past 12 months, equating to an annual saving of £468.

The biggest saving, however, comes in the shape of a five-year tracker with a 90 per cent LTV, which, with a current rate of 2.55 per cent, is now 13 per cent cheaper than it was in July 2015; meaning a potential £1,206 annualised saving.

The firm’s chief executive Mark Lofthouse said despite the Bank of England confirming the base rate will be held at 0.5 per cent, there is still a lot of uncertainty about rate movement and the cost of borrowing following the UK’s decision to leave the EU.

“A rush of rate cuts is still predicted and our month on month analysis validates this, with the cost of mortgages falling slightly compared to last month,” he stated.

“Our longer term analysis, however, clearly shows that homeowners - particularly first time buyers or those with low deposits - are in a very good position to benefit from the current reductions in the cost of mortgages.”

The majority of 60 per cent LTV mortgages have remained the same or increased in cost over the same period.

A two-year fixed with a rate of 1.89 per cent, for example, now costs almost 2 per cent more than it did this time last year, while a 90 per cent LTV five-year fix has seen no change in cost compared to last July.

There are some positives for those with bigger deposits, however, according to Mortgage Brain.

The cost of the lowest rate five-year tracker with a 60 per cent LTV is now 7 per cent lower than it was 12 months ago and offers borrowers a potential annual saving of £630 on a £150,000 mortgage.

The difference in cost between LTV bands has also reduced, with the lowest 90 per cent two-year fix costing just 5 per cent more than the same product with a 60 per cent LTV. This time last year the difference in cost between the two was almost 13 per cent.

Daniel Bailey, mortgage broker with Derbyshire-based Middleton Finance, agreed that first-time buyers with smaller deposits have benefited enormously over the last 12 months.

“Fixed rate deals have been coming down for the last few years, to the point where there are many two-year fixed deals at 90 per cent LTV below 3 per cent and a handful below 2.5 per cent,” he added.