We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies as per our policy which also explains how to change your preferences.

New 95% mortgages for first-time buyers launched: how do they compare?

Digital bank enters market for buyers with small deposits

First-time buyers will be able to secure a mortgage with just a 5% deposit from online-only lender Atom Bank, but how do these deals compare with other 95% mortgages available from high street banks?

In March, the number of mortgages available at a 95% loan-to-value ratio (LTV) hit a 10-year high. Now the online-only lender Atom Bank has joined the party by launching a new range of ‘digital mortgages’.

Here, we look at how these deals measure up, and explain whether eye-catching offers from challenger banks are the real deal – or too good to be true.

  • If you’re thinking of getting on to the property ladder, you can get impartial, expert advice on your mortgage options by calling Which? Mortgage Advisers on 0800 2942 849.

Atom Bank launches 95% mortgages

There is increasingly more choice for first-time buyers with a 5% deposit, with the number of available 95% mortgage deals reaching 307 in March – the highest level recorded since April 2008.

Indeed, the spring saw HSBC, Barclays and Sainsbury’s Bank all launching new deals at this loan-to-value ratio.

Atom has now become the latest lender to come out fighting, with three new 95% fixed-rate products that offer £500 cashback and mortgage terms of up to 40 years.

The digital bank, which launched its first mortgage products last year, claims to have lent £1.2bn to homeowners and small businesses so far.

But it’s worth keeping in mind that Atom Bank deals are ‘intermediary-only’ – meaning you’ll need to go to a mortgage broker to access them.


Does Atom top the charts?

How do the Atom Bank deals stack up against the competition?

In the tables below, we’ve looked at the cheapest fixed-rate deals currently available at 95% loan-to-value, based on their initial rates.

Two-year fixed-rate 95% deals

Position Lender Initial rate Revert rate APRC Fees
1 Marsden Building Society 2.89% 5.95% 5.6% £299 + 0.5%
2 Nottingham Building Society 2.89% 5.49% 5.2% £999
3 Yorkshire Building Society 3.19% 4.99% 4.7% £495
6 Digital Mortgages by Atom Bank 3.39% 3.75% 3.7% £0

Three-year fixed-rate 95% deals

Position Lender Initial rate Revert rate APRC Fees
1 Marsden Building Society 3.29% 5.95% 5.5% £299 + 0.5%
2 Clydesdale Bank 3.49% 4.95% 4.7% £0
3 Loughborough Building Society 3.49% 5.09% 4.9% £599
5 Digital Mortgages by Atom Bank 3.54% 3.75% 3.7% £0

Five-year fixed-rate 95% deals

Position Lender Initial rate Revert rate APRC Fees
1 Digital Mortgages by Atom Bank 3.64% 3.75% 3.7% £0
2 Clydesdale Bank 3.79% 4.95% 4.6% £0
3 Yorkshire Bank 3.79% 4.95% 4.6% £0

Notes: all mortgage data from Moneyfacts – accessed 23 May. Some deals are only available directly or through mortgage brokers. Products that are contingent on a guarantor (e.g. family mortgages) are excluded, as are deals that aren’t available in a minimum of two UK countries.

As you can see, the five-year deal from Atom is market leading by initial rate, while the two and three-year deals are competitive but don’t top the charts.

Where the Atom offers really win out, however, is in their revert rate (the rate you’ll be pushed on to once your initial term ends).

The bank’s low variable rate of 3.75% means that over the course of the whole mortgage term, each Atom deal is considerably cheaper than its rivals – with the overall cost for comparison (APRC) coming in as much as 1.9% lower than the competition.

How important is the APRC?

The low APRC means that overall the Atom Bank deals are the best over the long-term. But these calculations are based on your staying on the same deal for your whole mortgage term, which is something that very few people end up better off by doing.

Revert rates can vary over time, and there’s no guarantee Atom won’t put theirs up down the line. In addition, initial deal rates tend to be cheaper than most revert rates,

Overall, you may be better off remortgaging to a new deal at the end of your fixed term, before being moved on to a variable rate at all.

Will these deals stick around?

When smaller brands launch such attention-grabbing deals, their is a risk that the deal will be withdrawn fairly quickly.

In April 2017, Atom withdrew its market-leading five-year fixed-rate mortgage after just one week, in the face of ‘huge demand’ from applicants.

This hasn’t just been the case with mortgages, either. In September last year, Atom cut the rates of its chart-topping fixed-rate bonds to ‘rebalance’ business after a surge of interest.

Could you save more to get a better deal?

If you feel you can save more or aren’t in any rush to buy your first home, much better offers are available to buyers who can put down a 10% deposit and acquire a 90% mortgage.

As the table below shows, borrowers can save as much as 1% on the best initial rates by having a bigger deposit.

Product type Lender Initial rate Revert rate APRC Fees
Two-year fixed Yorkshire Building Society 1.82% 4.99% 4.5% £495
Three-year fixed Digital Mortgages by Atom Bank 2.14% 3.75% 3.4% £900
Five-year fixed Digital Mortgages by Atom Bank 2.34% 3.75% 3.2% £900
  • If you need some advice on your mortgage options, you can fill out the form below for a free callback from a mortgage adviser.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

Back to top
Back to top