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90% mortgage rates drop: Which? reveals the best first-time buyer deals

Low-deposit mortgages fall in cost as lenders relaunch first-time buyer deals

90% mortgage rates drop: Which? reveals the best first-time buyer deals

Lenders are continuing to relaunch their low-deposit mortgages, meaning first-time buyers could find it easier than before to get on to the property ladder.

The number of 90% mortgages on the market has risen significantly in the past couple of months, but rates remain much higher than before the pandemic.

Here, Which? reveals the best rates available to first-time buyers and gives advice on buying your first home in 2021.


Low-deposit mortgages return for first-time buyers

Nine in 10 90% mortgages were withdrawn from the market in the wake of the COVID-19 outbreak last spring.

Nearly a year on, first-time buyers have finally been handed a boost, with the majority of major lenders now offering low-deposit deals again.

Data from Moneyfacts shows that 15 lenders have relaunched deals since the turn of the year. In the last week alone, Ipswich Building Society has launched a new 90% deal and Nationwide has cut the rates on its first-time buyer mortgages.

Overall, there are now 196 fixed-rate 90% mortgages available to first-time buyers, compared to just 88 at the start of December.

What does this mean for rates?

More choice is great news for borrowers, but at this stage rates are only dropping slightly.

Lenders are very much proceeding with caution by bunching their deals together, with no one so far offering a truly headline-grabbing rate.

For example, on two-year fixes, HSBC, NatWest, Virgin Money, RBS and Santander are all offering rates between 3.24% and 3.29%.

It’s a similar story for five-year deals, with Halifax, HSBC, Virgin Money, NatWest and Nationwide all pricing their deals between 3.41% and 3.44%.

The graph below shows how the average rate on 90% deals has dropped recently but remains significantly higher than before the pandemic.

The Which? Money Podcast

Best rates on 90% mortgages

Two-year fixed-rate deals

The best rate currently available on a two-year fix is from Penrith Building Society, but you can only apply for this deal if you live in Cumbria.

The cheapest nationally available deals start at 3.09%, well above the 1.8% recorded before the COVID-19 outbreak last March.

As the table below shows, there’s little to choose between the cheapest five deals.

Lender Initial rate Revert rate  Upfront fee Cashback
Halifax 3.09% 3.59% None None
Atom Bank 3.14% 3.5% £1,500 £500
Platform 3.14% 4.34% £1,499 £250
Metro Bank 3.19% 3.6% £999 None
Nationwide 3.19% 3.59% £999 None

Note: Data from Moneyfacts, 24 February 2021.

Five-year fixed-rate deals

Five-year deals usually have higher rates than two-year deals because they offer a longer period of rate certainty. But now, the gap in cost between the cheapest two and five-year fixes is just 0.29%.

The table below shows how the five cheapest deals by initial rate are separated by just 0.01%.

Lender Initial rate Revert rate  Upfront fee Cashback
Yorkshire BS 3.38% 4.49% £995 None
Atom Bank 3.39% 3.5% £1,500 £500
Metro Bank 3.39% 3.6% £999 None
Platform 3.39% 4.34% £1,499 £250
Skipton BS 3.39% 4.64% £995 None

Note: Data from Moneyfacts, 24 February 2021.

Will 90% deals get cheaper?

If you’re thinking of getting a 90% mortgage, it might be wise to wait a little longer.

We’ve seen a handful of banks cut their rates in the last month, and as demand from first-time buyers rises, so too may the competition to offer the cheapest deals – resulting in lower prices.

We’ve got loads of mortgage advice, from how to find the best deal to our how much mortgage can I borrow? calculator.

Is it worth saving more to get a lower rate?

Generally speaking, the bigger your deposit, the cheaper your mortgage rate.

The cheapest two-year 90% fix is priced at 3.09%, but you can get an 85% mortgage with a considerably lower rate of around 2.5%.

If you can save an extra 5% deposit, you can usually save around 0.6% to 1% on your rate, meaning you could make substantial savings on monthly payments in the long run.

Buyers with bigger deposits also tend to have more choice. Right now, there are 315 fixed-rate 85% mortgages for first-time buyers, compared to 196 90% deals.

computer screen showing mortgage application form

Are 95% mortgages likely to make a comeback?

It’s likely to be some time before we see 95% deals come back to the market.

At the start of March last year, there were 391 95% deals available for first-time buyers – this month it’s dropped to just three – and none are widely available.

With the pandemic continuing, it seems highly unlikely that 95% mortgages will return in a big way in the coming months.

If you’re looking to buy a home with a 5% deposit, you may be best considering schemes such as Help to Buy – which will be relaunched with new price caps this April – or looking into options such as guarantor mortgages.

How to buy your first home in 2021

It’s a tough time to get on the property ladder, with the pandemic bringing uncertainty and the stamp duty holiday resulting in rising house prices.

We’re here to help with all the advice you need, whether you’re putting money aside for a deposit or are ready to apply for a mortgage.

As a starting point, check out our step-by-step guide to buying a house, which takes you on the journey from saving a deposit to exchanging contracts.

If you’re struggling to get to grips with mortgages, we’ve got lots of advice on the different types of deal, how much you can borrow and how to apply.

Finally, why not check out our mortgage lender reviews, which combine customer ratings with our expert analysis to identify the UK’s best mortgage lenders?


This story was originally published in January 2021. It is regularly updated with the latest 90% mortgage deals and rates. The last update was on 24 February 2021.

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