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Cost of borrowing for those with low-deposits increases

Jake Carter

December 2, 2020

The cost of borrowing for low-deposit borrowers has increased substantially across all mortgage types over the past 12 months, according to Mortgage Brain.

The mortgage technology expert noted that the cost of a 90% LTV 2-year fixed rate mortgage has jumped by more than 28% between November 2019 and November 2020

In monetary terms, that means the cost per £1,000 borrowed has grown from £4.06 to £5.22 over the year.

For a loan of £200,000 this equates to an annual increase of £2,784.

Looking to the cost of a three-year fixed rate mortgage at 90% LTV, this has risen by 17.2% across the same period, which equates to an increase from £4.31 to £5.05 per £1,000 borrowed.

Furthermore, the cost of five-year fixed rate mortgage at 90% LTV band have seen a rise of 9.7%, from £4.35 to £4.77 per £1,000 borrowed.

For a loan of £200,000 the increases in the annual payments are £1,776 and £1,008 respectively.

Meanwhile, the cost of a 60% LTV two-year fixed rate has grown 2.96% from £3.71 to £3.82 per £1,000 borrowed.

Neil Wyatt, sales and marketing director at Mortgage Brain, said: “Lenders have understandably taken a more cautious approach to their product ranges due to the operational and potential economic impacts that have been experienced as a result of the COVID-19 pandemic, and that’s been seen most clearly with the products on offer to borrowers with a deposit of just 10%.

“Not only has there been a significant reduction in the availability of these products, but the costs of the products that are on the market have increased to a striking extent.

“It’s not just those with small deposits that face higher costs than a year ago though. In fact, it’s only five-year fixed rate mortgages which have seen costs fall over the last 12 months.”


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