The average rate of a high loan-to-value mortgage has reached its lowest level in more than a decade, according to Moneyfacts data.
Despite last month’s Bank of England base rate rise, the average rates of both two and five-year fixed rate mortgages at 95 per cent loan-to-value (LTV) have reached their lowest level since Moneyfacts’ records began in 2007.
On Monday, 24 September, the average two-year fixed rate on a 95 per cent LTV product sat at 3.73 per cent - a drop of 0.22 percentage points compared with August’s figure and down from an average of 5.67 per cent in September 2013.
The average five-year fixed rate on a 95 per cent LTV has also seen a steady decrease in recent years, with a current rate of 4.08 per cent - compared with 5.38 per cent five years ago.
Charlotte Nelson, finance expert at Moneyfacts, said the drop was good news for first-time buyers who may have anticipated the base rate rise would lead to increases for higher LTV products.
She said: "With 95 per cent LTV borrowers often seen as the lifeblood of the market, providers are keen to be seen as the go-to lender for this vital group, not only for the positive message this brings, but also so they can better rejuvenate their mortgage book with new customers."
She said the number of lenders had also grown in this sector, jumping by 10 in two years to now stand at 58. "This is a result of many providers beginning to feel as though the lower LTV sectors are becoming increasingly saturated, and are therefore looking for alternative areas to branch into," Ms Nelson said.
She added with competition in the high LTV market increasing, first-time buyers were benefiting from a rise in the number of mortgages available. Currently there are 345 individual 95 per cent LTV deals in the market, 120 more than in September 2016.
Ms Nelson added: "This extra choice is borne from providers looking to offer these borrowers a wide variety of choice, by launching multiple options within the same range."
Rachel Lummis, mortgage adviser at Xpressmortgages, said getting a high loan to value mortgage such as 95 per cent over the past decade was not easy due to few lenders offering the product - but considerable changes have been witnessed in the space over recent years.
She said: "With so many lenders available now compared with recent years it is important that anyone looking to purchase seeks advice from a whole of market mortgage adviser. The main high street lenders have some decent rates but there are offerings from many smaller banks and building societies that have competitive rates too, so it is important to compare the many lenders and products available."
However, Ms Lummis said further improvements were needed to the range currently offered, suggesting lenders should offer a product transfer service to customers nearing the end of their deal. They should also offer 95 per cent LTV to remortgages in addition to purchases.