Fruitful year ahead for aspiring first-time buyers
First-time buyers and those with little equity to refinance will find greater mortgage choice. During January, there was an uplift in higher LTV deals, with 90% LTV options at a record-high, plus a boost to 95% LTV deals, which are at their highest count since March 2008. The electronic monitoring of LTV choice at Moneyfacts started in July 2007.
Product choice overall rose month-on-month, to 7,537 options; year-on-year, there are now over 1,000 more deals available.
Mortgage activity resulted in a rise in the average shelf-life of a mortgage to 33 days. This is a typical pattern seen for the seasonal slowdown during the start of a new year.
Fixed mortgage rates rose for the first time since October 2025. The average two- and five-year fixed mortgage rates rose by 0.02% and 0.03% respectively month-on-month, to stand at 4.85% and 4.94% respectively.
The Moneyfacts Average Mortgage Rate rose to 4.90% month-on-month from 4.87%. Year-on-year the rate is down by 0.55%, from 5.45% in February 2025.
Cuts to the Bank of England Base Rate have helped fuel the fall of the average two-year tracker variable mortgage rate, now down to 4.41% from 4.44% month-on-month, which is down by 1.05% year-on-year from 5.46%.
Remortgage customers will find the incentive to switch has intensified, as fixed rates are substantially lower than the average ‘revert to’ rate or Standard Variable Rate (SVR). The average SVR fell to 7.15% month-on-month, now down by 0.63% year-on-year from 7.78%. The highest recorded was 8.19% during November and December 2023. However, those coming off a fixed deal from 2021 could see their repayments rise.
Rachel Springall, Finance Expert at Moneyfacts, said:
“This year is setting itself up to be a fruitful one for first-time buyers, and really, they need all the help they can get amid the lack of affordable housing. Despite the volatility in mortgage rates over recent weeks, and a typical seasonal slowdown in activity that resulted in a rise to the average shelf-life of a deal to 33 days, the latest boost to product choice and sentiment towards relaxing stress tests will be encouraging news to borrowers.
“Mortgages at the 90% loan-to-value (LTV) tier now represent a 13% proportion of the residential mortgage market, with 95% LTV deals representing a small fraction of just 7%. The number of options in both of these sectors rose month-on-month, which has led to a record-high count in the number of deals available to borrowers with a 10% deposit or equity. The rise in choice included the entry of specialist lender West One onto our systems during January, but also from Penrith Building Society launching higher LTV options. While a helpful boost, there is much more room for improvement to improve choice and competition at the higher LTV spectrum.
“Outside of the options for borrowers, there have been some noteworthy reviews in loan-to-income ratios over recent months, which will further boost the chances for new buyers to secure a deal. One example is Nationwide, which now lends up to six times income to remortgage customers or those moving home, up to 95% LTV. Lenders have been urged to do more to support first-time buyers to boost UK growth, so any improvement should be welcomed. However, seeking advice before entering any arrangement is essential. Hopefully, there will be ongoing improvement to mortgages, as a ‘Roadmap’ review into lending by the Financial Conduct Authority is set to take centre stage this year.
“Not every borrower will feel as optimistic about falling mortgage costs this year, as there will be a divide among those remortgaging, depending on when they locked into their initial rate. Borrowers who take out a two-year fixed mortgage compared to 2024 could see potential savings of £104 per month, or £1,248 a year, when taking a £250,000 mortgage over 25 years. Borrowers coming off a two-year fixed deal are expected to save a bit back each month when they lock into a new fixed deal, they could consider using the savings to overpay their mortgage. However, taking out a five-year fixed deal compared to back in 2021 would cost £302 per month more in repayments, which is an additional £18,120 in repayments over a five-year period. Mortgage rates were around 2% lower on average in 2021, so it would be wise for borrowers to seek advice if they are concerned about rising payments.”
Mary-Lou Press, NAEA Propertymark President, comments:
“The increase in higher loan-to-value mortgage products is a welcome and much-needed boost for first-time buyers, many of whom continue to face significant affordability pressures. Greater choice at 90% and 95% LTV, alongside signs of more flexible lending criteria, should help more people take their first step onto the property ladder.
“However, improved access to finance must be matched by action to increase the supply of genuinely affordable homes. Without addressing the chronic shortage of housing, particularly in areas of high demand, many aspiring buyers will still struggle despite these positive developments in the mortgage market.”
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