New analysis from mform.co.uk has found that two-year tracker rates for borrowers with a 40 per cent deposit can be as low as 3.99 per cent, while for two-year fixed rates they can be 4.49 per cent for a £150,000 loan.
But if the borrower only has a 20 per cent deposit, rates rise to 5.99 per cent for trackers and to 6.45 per cent for fixed rates. If the borrower only has a 10 per cent deposit then there are no trackers and the lowest rate for a fixed deal is 6.45 per cent.
Mform says this translates into huge differences on the true cost of the deal including all fees. The average true cost of a two-year fixed deal at 60 per cent LTV is £21,265 compared with £25,729 for a 90 per cent deal – a difference of £2,232 a year.
For a two-year tracker the difference in true cost is £1,919 a year – the average cost at 60 per cent LTV is £20,907 compared with £24,746 at 80 per cent LTV.
Mform.co.uk marketing and business development director Francis Ghiloni says: “The mortgage market is entirely back to normal as long as you have a deposit of 40 per cent which is okay for some remortgagers – but of course that is a long way from normal and doesn’t help the housing market as by definition to move up to larger properties families need to stretch their borrowing.
“It is encouraging that there are good deals out there but disappointing that the choice is reduced for those with smaller deposits who will typically be first-time buyers or those who have bought in recent years and have not seen a significant rise in their homes value.”