95% Mortgage Deals At A Price

In the current economic climate finding a good 95% mortgage is simply almost impossible.  Banks are not openly lending and any available deals are set to a much lower loan-to-value, meaning a much higher deposit is required.  In some quarters maintaining a restriction on high loan-to-value mortgages is seen as a positive move in order to help eliminate boom and bust.

As of August 2009 there are one or two deals out there, but like other attractive type deals on the market they have a sting in the tail. 

The Halifax has a range of fixed rate deals up on various LTV levels up to a 95% mortgage:

2 year fixed rate                        5.19%              £999 setup

3 year fixed rate                        5.29%              £999 setup

3 year stepped fixed rate          

Year 1                                      4.29%

Year 2                                      5.39%

Year 3                                      5.99%              £999 setup

5 year fixed rate                        6.19%              £999 setup

Within these deals the early redemption fee ranges from 2% to 5% so caution needs to taken when choosing one of these 95% mortgages.

Lloyds TSB offer a 95% mortgage called a Lend a Hand mortgage.  It is a 3 year fixed rate mortgage aimed exclusively at first time buyers at varying rates depending on the setup fee:

4.99% at a £995 setup fee

5.29% at a £495 setup fee

5.69% at a zero setup fee

The rates are quite attractive but this 95% mortgage is not quite all it seems.  The borrower must also deposit 20% of the mortgage value in a savings account.  As this deal is aimed at first time buyers these funds would be provided by a close friend or relative.  The savings will be held by the lender for at least 3 years and until the homeowner has build up at least 10% equity.

Effectively 5% will have to be paid off the loan in the first 3 years or that house prices will increase by 5% or more in that period in order to be able to free the savings.  Therefore if house prices drop the savings can be trapped long term.   This type of 95% mortgage deal is a variant of a guarantor mortgage and real care needs to be taken before taking the plunge and tying up large amounts of family members savings.

Nationwide are offering a 95% mortgage to existing borrowers, along with one or two other lenders but the days of great choice have gone and there does not seem to be an appetite to return to them.  Foreign lenders are moving into the UK market which will be good for competition and help keep rates down but the LTV of these deals are unlikely to move up freely to the levels of a 95% mortgage or 100% mortgage as they once did.

Latest on 95% mortgage deals