Prospective property buyers looking for a low-deposit mortgage can now enjoy a greater number of products to choose from, with one lender launching a new zero-deposit mortgage option for qualifying borrowers.
Low-deposit mortgages – typically those offering borrowers a 90% or 95% loan to value (LTV) ratio – are a product that has ebbed and flowed over the years, often linked to the wider economic landscape. In the wake of the financial crisis of 2007/2008, for example, lenders became much less likely to offer low-deposit mortgages due to the greater risk involved.
Numbers dipped again as a result of the Covid pandemic of 2020, due to lenders’ fears over the economy and buyer incomes which again made higher loan to values seem more risky. This meant borrowers generally needed to stump up higher deposits to secure a mortgage.
Now, new research from Moneyfactscompare has revealed that the number of low-deposit mortgages being offered by lenders has hit its highest level since 2020, with product numbers for 95% LTV deals hitting 388 this month.
While this only represents 6% of all mortgage products available – with the rest being those that require 10% deposits or higher – it is a positive movement for those buyers who have smaller deposits, whether they’re looking to step onto the housing ladder for the first time, or move house.
Rates on low-deposit mortgages
According to Moneyfactscompare, average rates for low-deposit mortgages have increased slightly since last month’s figures. The average two-year fixed rate with 95% LTV is now 5.94% (up from 5.86%), while for a five-year fixed rate it is now 5.72% (up from 5.47%).
However, these products are cheaper now than they were last summer: in August 2024, the average two-year fixed rate for borrowers with a 5% deposit was 6.17%, while for the average five-year deal the rate was 5.67%.
Commenting on the figures, Rachel Springall, Finance Expert at Moneyfactscompare, said: “Borrowers with a limited deposit may find it encouraging to see a growth in choice for mortgages available at 95% loan-to-value, now at its highest count in almost five years. There are now 388 options available, the highest level since March 2020, when there were 391 deals.
“This is positive to see, but there is still lots of room for more deals to be pushed out in this area of the market as it represents just 6% of all deals available to borrowers across fixed and variable mortgages. Despite rising choice, average rates across a two- or five-year fixed deal at 95% loan-to-value are higher than at the start of 2025.
“Overall product availability across the mortgage spectrum fell, but the average shelf-life of a deal rose month-on-month, which was largely expected due to the festive period when there are typically fewer changes from lenders.”
Can property investors get low-deposit mortgages?
Property investors looking for a buy-to-let mortgage tend to find that most lenders require a larger deposit than they would for a standard residential purchase. Generally, this takes low-deposit mortgages off the table for property investors.
Often, you’ll need a 25% deposit to secure a buy-to-let mortgage, meaning an LTV of 75%. How much you can borrow is not only based on your financial position, but also on the projected monthly rental income of the property. Your rental income must normally cover 125% of your mortgage repayments.
Depending on your circumstances, some lenders will accept smaller deposits from property investors and buy-to-let landlords, which could mean you only need a 15% deposit, securing a buy-to-let mortgage with 85% LTV.
A popular option for landlords is to opt for an interest-only mortgage, rather than a capital and interest repayment product. This means you only pay off the interest on the loan each month, without paying down any of the amount borrowed. While this makes the monthly cost of the mortgage cheaper, it means that you will need to make a lump sum payment at the end of the mortgage to pay off the loan, through either selling the property or by other means.
If you’d like to find out more about securing a buy-to-let mortgage to invest in UK property, get in touch with BuyAssociation today, who can put you in touch with an independent mortgage expert.
