Applying for a 95% Mortgage

According to The Guardian Newspaper, there were just six 95% mortgage products available in June 2009, making it almost impossible for the cost-conscious first time buyer to grab a rung on the property ladder. While the UK housing market may still be less than stellar, there are signs that the tide is turning and those who had resigned themselves to am lifetime of renting are now seeing a glimmer of hope as 95% mortgages return to the market. Industry research suggests that there are now more than thirty 95% mortgage products on the high street.

The option to apply for for a 95% mortgage and the new willingness shown by lenders to consider this high loan to value (LTV) ratio is a bright spot in an otherwise dim property market landscape. Particularly for those under 30 who had resigned themselves to never taking possession of their very own set of keys, the emergence of 95% mortgage products is on the face of it, great news. But, is it really that simple to apply for a 95% mortgage and be successful? Unfortunately not.

There are hundreds of mortgage products available from high street lenders – there are almost 14,000 mortgage products available according to the Monthly Index with a steady stream of new deals being offered to intermediaries over the last 12 months pushing this number to its highest point in years. But of these thousands, only 32 are 95% mortgages.

Experts warn that simply hunting out a lender willing to give out a 95% mortgage application form is just the start of an uphill struggle. While it may first appear that 95% mortgages are on the increase, it soon becomes apparent that they come with many strings attached.

A number of analysts have confirmed that although a smaller deposit is required, those applying for a 95% mortgage may actually end up paying more in the long run as the rates are typically much higher than on an 80% LTV or even 90% LTV mortgage.

Many lenders will also factor in more stringent requirements than for other mortgage products and some experts have warned that the tougher requirements will be combined with harder credit scoring, making it extremely difficult to reach an approved status.

For those unable to meet these demanding criteria, a 90% mortgage or 80% mortgage may be a smarter long term solution.