In a competitive mortgage market, lenders have to work hard to ensure that they are pricing correctly to attract not just the desired volume but also the appropriate business mix.
There was understandably a keen focus on the low loan-to-value market following the financial crisis as lenders pulled away from products for those with small deposits.
Products are still typically segmented by LTV, with the keenest rates on offer to those that can typically stump up at least 40 per cent.
As competition intensifies for the ‘vanilla’ business, margin comes under increasing pressure and lenders have consequently looked higher up the LTV scale to see if they can compete more readily.
This has been good news for borrowers, as it has driven down the cost of higher LTV deals, especially as the number of lenders operating in that market has grown substantially in recent years.
Two-year fixed rates are now widely available below the 3 per cent mark, which appeared to be such a hurdle for so long.
In fact, Newcastle Building Society offers a two-year fixed rate at 2.59 per cent to 95 per cent LTV with a £498 fee.
Two-year rates have tended to remain popular at higher LTV, largely because of the premium in rate, even when compared with those available to borrowers with a 10 per cent deposit.
Home buyers will have hoped that a combination of repayments and rising house prices would be enough to open up a wider range of options in a couple of years.
However, a recent launch from Hanley Economic Building Society now offers a five-year fixed rate option at a rate of 2.99 per cent to 95 per cent LTV, with an application and product fee totalling £999 and a free valuation.
Although borrowers will still open up cheaper options if they can stretch to a bigger deposit, this rate may offer a very acceptable compromise for those that cannot.
That could be particularly true given the level of uncertainty that prevails at the moment, and which means borrowers often opt for medium-term protection.
David Hollingworth is associate director of communications at L&C Mortgages
