The latest research from moneyfacts.co.uk shows that while the average two-year fixed mortgage rate has experienced an increase at all loan-to-values (LTVs) in the past month, rates at 95% LTV have been the hardest hit, showing a 0.10% increase from September compared to a 0.03% increase in the average rate at 60% LTV.

AP rates rising following intense speculation about an imminent base rate rise, many providers are starting to factor in the extra cost. At 95% LTV, providers have an added element of risk if base rate does go up, as the probability of borrowers defaulting on their mortgage could increase. This needs to be factored in.

“When comparing the increases at 60% LTV to those at 95% LTV, the difference is stark. Providers are looking to remain competitive to those remortgaging and protect their mortgage books in the event of a rate rise, which is why rate rises at lower LTVs are being kept to a minimum.

“The combination of rates rising now and a potential base rate rise around the corner could see first-time buyers who’ve managed to get a deposit together having to deal with higher monthly repayments, which could eat further into their income, causing them struggle. Some borrowers turn to lengthening their mortgage term to combat these higher repayments, but this will cost them more in the long run.

“First-time buyers looking for a mortgage should shop around to get the best possible deal. Anyone considering getting onto the ladder in the future should try not to panic and seek advice from a financial adviser if they are unsure about their options.”

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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