Rates on 95 per cent loan-to-value mortgages have dropped despite speculation interest rates may rise.
Research from Moneyfacts showed the average rate on a two-year mortgage at 95 per cent LTV fell to 4.06 per cent from 4.11 per cent at the start of the year. The typical five-year deal has fallen six basis points to 4.43 per cent.
The average rates on both two- and five-year deals are now lower than they were a year ago.
Charlotte Nelson, finance expert at Moneyfacts, said: "Since it was announced that base rate remains on hold this month, the rest of the market has continued on its upward trajectory but higher LTV products seem to be forging their own path.
"This is great news for first-time buyers, especially as they often bear the brunt of any rate rises in the market. Competition in this sector is high particularly among lenders looking to revitalise their mortgage book by bringing new borrowers on board."
Ms Nelson added that lenders were using an array of different incentive packages and fees to attract borrowers.
But she said: "Borrowers still need to bear in mind that rates remain higher and they will be significantly better off if they can save an extra 5 per cent for a deposit."
In fact borrowers who are able to save a 10 per cent deposit for a property purchase still had access to much lower rates. The typical two-year fixed rate at 90 per cent LTV was just 2.74 per cent.
On a £200,000 loan over 25 years repayments would be £141.82 a month less than the typical two-year 95 per cent deal.
Daniel Middleton of mortgage broker firm Middleton Finance agreed that in many instances buyers may be better off not making a purchase until they have a bigger deposit.
He said: "I have recently had a case where a first-time buyer was looking at 95 per cent LTV mortgages but decide to hold off and keep saving until they could afford a 10 per cent deposit as the interest rates and monthly payments were so much better."