That’s the conclusion of new research which has found that there is a substantial difference in cost between low loan-to-value deals and the products available to borrowers with a smaller deposit.
FT Advisor reports that the ‘huge disparity in mortgage rates’ means that some deals are up to twice as expensive as others. Keep reading to find out more about low mortgage deposits within the large mortgage market and this latest research below.
Borrowers faced with ‘wildly disparate’ mortgage rates depending on deposit
A study by a leading mortgage company has found that high value mortgage customers are being faced with wildly different mortgage rates depending on the proportion of the property value that they want to borrow.
Industry outsourcing firm Mortgage Brain has found that the cheapest 90 per cent mortgage carries a rate more than double that of the cheapest deal at 60 per cent borrowing. FT Advisor reports that ‘borrowers are being faced with wildly disparate mortgage rates across different loan-to-value ratios’.
Mark Lofthouse, chief executive of Mortgage Brain, said: “Our new product data analysis provides a very clear and concise picture of the true cost of a repayment mortgage and makes like for like comparisons to be made across different product types.
“Not only can this new data assist brokers when they’re conducting a mortgage search and comparing products with their clients, but lenders can also use it to ascertain the position and competitiveness of their products within the market.”
Data published by the firm reveal that the lowest interest rate for a 90 per cent two-year tracker mortgage on a £180,000 property is more than double – 105 per cent more – than that of the lowest rate product with a 60 per cent loan to value. The 90 per cent loan therefore costs 60 per cent more in repayment than the cheaper alternative, the firm adds.
What’s the difference for rates with low mortgage deposits?
For two-year fixed rates on the same property value, the Mortgage Brain data reveal that the difference in the lowest rate available between a 90 per cent and 60 per cent loan to value is 82 per cent. This means the lowest two-year fixed rate mortgage will cost borrowers 20 per cent more at the higher loan to value.
“This research shows what we have known for some time, namely that lenders are desperate for ‘low risk’ business and are prepared to offer cut price deals to secure high value mortgage clients,” said Islay Robinson, CEO of London mortgage advisor Enness Private Clients.
“The difference in mortgage rates between different loan to value bands is as pronounced as it has ever been. What this means is that large mortgage customers can benefit hugely simply by putting down an additional 10 per cent, or in some cases just 5 per cent, deposit. With lenders chasing those high net worth mortgage customers, it’s never been more important to put down as much as possible if you’re keen to benefit from the very best large mortgage deals.”