Research from Moneyfacts.co.uk reveals that despite average mortgage rates falling across the market, the gap between the 60% loan-to-value (LTV) bracket and the highest LTV band (95%) has expanded. Statistics show the divergence has grown by 0.31% in just six months.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“With improvements seen throughout the mortgage market of late, particularly for those with a 5% deposit, many would assume that the LTV-gap would have narrowed or even been bridged. However, it is disappointing to find that the reverse is true, with the gap bigger now than it was five years ago.

“Deals on the market today can seem worlds apart, particularly when you look at the lowest deals available on the market. For example, the lowest two-year fixed rate on the market at 60% LTV is 0.99%, whereas the lowest at 95% stands at 3.29% - a whopping 2.30% difference.

“The 60% LTV sector has been lenders’ main target for some time, with providers actively seeking to be the lowest ever across the market, and it is this intense competition that has seen the gap grow despite average rates for higher LTVs also falling.

“There will always be a difference between the two sectors due to the extra risk involved in lending to a borrower who has just a 5% deposit, compared to those who have a much larger deposit.

“First-time buyers may feel that they are hit almost twice, with them not only having to struggle to gather enough cash for a deposit, but then also face a significantly higher rate which could see them pay an extra £184.74* a month.

“First-time buyers should not be discouraged, however, as borrowers sitting close to the 90% LTV bracket could reduce their monthly repayments by saving that little bit extra to be able to move to the lower band. With plenty of deals now out there, borrowers at any LTV have the pick of the bunch, so they would be wise to shop around to assess the options that are available to them.”

*Repayment based on a £150,000 loan over 25 years.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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