Northern Rock has launched a range of 90% loan-to-value (LTV) .
The mortgage lender, nationalised during the credit crunch in 2008, said the deals should appeal to those who have lower deposits and to first-time buyers. Customers with a 10% deposit will pay 5.99% if they fix their repayment rate for two years, while a three-year fixed-rate deal is 6.49% and a five-year fixed-rate deal is 6.59%. All come with no arrangement fees.
Which? property and mortgages expert Cathy Neal commented: ‘Although these deals from Northern Rock are more expensive than 90% deals currently available from other lenders, it’s good to see more choice for borrowers with only a 10% deposit.’
In January, the number of deals available across the market to those seeking a 90% mortgage – which were common before the start of the financial crisis – increased by 26%. However, even with lenders resuming these types of loans, the number of products is down 75% from pre-crisis levels.
Mortgage issues affecting market
There are particular problems for existing borrowers at high LTV mortgages. Many of these customers are trapped on their lender’s standard variable rate as there are no deals for them to remortgage to and will face a significant payment shock when interest rates rise.
Which? research has shown a significant reduction in mortgage offers for borrowers with a 90% LTV mortgage and virtually no mortgage offers for LTVs above 90% – evidence of the very limited choice available to these consumers.
Which? is calling for mortgage lenders to provide acceptable alternatives for existing customers, where necessary, and for the Financial Services Authority to take swift action against any mortgage lender who treats existing customers unfairly.
Which? mortgage comparison tool
If you are on the hunt for a new deal, make sure you remember to compare the total cost of the mortgages you’re looking at – not just the headline rate of interest. This is important as some lenders charge such high fees for arranging your deal that a seemingly cheap mortgage can end up being expensive.
You can read more about the different types of mortgages that might be available to you in our Mortgage deals explained advice guide.
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