Mortgage market starting to relax

Analysis by moneysupermarket.com shows the number of mortgages available at 85% LTV is at its highest since October 2008 and the number of mortgages available at 90% LTV is at its highest since December 2008.

The average rates of these high LTV mortgages are also providing a positive outlook for those with a relatively small deposit. The average rate of mortgages at 85 and 90% LTV have dropped to their lowest level since the fulcrum of the financial crisis in October 2008. Since September 2009 the average rate of an 85% LTV mortgage has dropped by 0.68% to 5.54%; and the average rate of a 90% LTV mortgage has dropped 0.33% to 5.98% - the first time this rate has dropped below six per cent since the start of the credit crunch.

Hannah-Mercedes Skenfield, mortgages channel manager at moneysupermarket.com, said; "These are positive signs for people who can only muster a small deposit, or have little equity built up in their home. For too long the supply of mortgages to this group of people has been too limited. The launch of a new range of 85% and 90% deals from the Post Office should really help stimulate competition and get this market moving again.

"One of the most telling trends of the last two years has been lenders' near obsession with equity. The simple fact is that plenty of people can afford mortgage repayments but struggle to save the many thousands of pounds usually required for a 20 to 30% deposit. This means that many people have been needlessly locked out of the mortgage market, perhaps now this will begin to change.

"Potential borrowers should remain aware that they will find a significantly better deal if they can pull a sizable deposit together. Whilst we can be pleased the average rate of a 90% mortgage has finally fallen below 6%, we should also lament the fact that this is still nearly 5% above the Bank of England base rate."