The latest data from Moneyfacts reveals a rise in choice for borrowers with small deposits. This, coupled with stress test relaxation, "sets the stage for a fruitful year ahead for aspiring first-time buyers", Moneyfacts says.
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.
Product choice overall rose month-on-month, to 7,537 options; year-on-year, there are now over 1,000 more deals available.
Fixed mortgage rates rose for the first time since October 2025. 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%.
The Moneyfacts average mortgage rate rose to 4.90% month-on-month from 4.87%. However, year-on-year the rate is down by 0.55%, from 5.45% in February 2025.
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% 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.”
