As banks continue to relax their lending criteria it has been revealed that the number of 95 per cent loan to value mortgage deals has reached its highest level in over two years. 

The news is a boost for first time buyers who have been struggling to get onto the property ladder in recent years, although experts warned that these 95 per cent deals were uncompetitive in relation to other mortgage and remortgage products.

Increase in choice of 95% mortgage deals

The financial data analyst Moneyfacts found that there are now 31 products in the UK which offer a 95 per cent mortgage, compared to 24 in January 2011 and just six in June 2009.  Homebuyers looking for a 90 per cent mortgage also have more choice in today’s market, with 244 products available compared to just 77 in 2009.

Despite the slight increase in products the choice is still minute compared to before the ‘credit crunch’.  The Guardian reports that ‘you only have go back to 2007-08 to see how the lending landscape has changed.  In August 2008 the number of 95 per cent deals available stood at 134. Twelve months earlier, it was almost 1,000.’

Experts warn that 95% borrowers face higher repayments

While more products may now be available, experts warn that the interest rates on 95 per cent deals tend to be much higher than those available to people wanting a lower loan to value.

The average two year fixed rate for a 90 per cent mortgage is currently 5.95 per cent, compared to just 3.73 per cent for those who can put down a 40 per cent deposit.  In addition, it is often hard to pass the credit scoring requirements of a 90 or 95 per cent loan and there may be other stringent qualifying requirements.