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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

90% mortgages are becoming cheaper and more widely available to first-time buyers.

With a week to go until the government’s new mortgage guarantee scheme launches, lenders are cutting the cost of getting a mortgage with a 10% deposit.

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Nine in 10 90% mortgages were withdrawn from the market in the wake of the COVID-19 outbreak last spring.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 been handed a boost, with the vast majority of major lenders now offering low-deposit deals again.

The number of 90% deals has risen significantly in the last few months, and with the government’s new guarantee scheme set to launch next week, buyers with smaller deposits of just 5% should see their options increase too.

Overall, there are now 244 fixed-rate 90% mortgages available to first-time buyers, compared to 196 a month ago and just 88 at the start of December.

What does this mean for rates?

More choice is great news for borrowers, and the best rates are beginning to fall.

There’s unlikely to be a huge rate cut anytime soon, however, as the biggest lenders are continuing to proceed with caution by bunching their deals together.

For example, on two-year fixes, Halifax, NatWest, Santander and TSB are all offering rates between 3.14% and 3.24%.

It’s a similar story for five-year deals, with Halifax, NatWest, Santander and Virgin Money all pricing their deals between 3.41% and 3.43%.

The graph below shows how the average rate on 90% deals has changed since the start of the pandemic.

The Which? Money Podcast

Best rates on 90% mortgages

The average rate on 90% deals might have plateaued in the last month, but the cheapest rates on two and five-year fixes have dropped by 0.1% and 0.09% respectively in that period.

Two-year fixed-rate deals

The cheapest nationally available deals start at 2.99%, which remains 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
Atom Bank 2.99% 3.5% £1,500 None
Platform 2.99% 4.34% £1,499 £250
Nationwide 3.04% 3.59% £1,499 £500
HSBC 3.09% 3.54% £999 None
Yorkshire BS 3.1% 4.25% £995 None

Note: Data from Moneyfacts, 23 March 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 0.39%.

The table below shows how the five cheapest deals by initial rate are separated by just 0.09%.

Lender Initial rate Revert rate  Upfront fee Cashback
Atom Bank 3.29% 3.5% £1,500 None
Nationwide 3.34% 3.59% £1,499 £500
Platform 3.35% 4.34% £1,499 £250
HSBC 3.36% 3.54% £1,499 None
Yorkshire BS 3.38% 4.49% £995 None

Note: Data from Moneyfacts, 23 March 2021.

Will 90% deals continue to get cheaper?

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

Banks have begun to cut their rates, and if we see an influx of 95% deals when the mortgage guarantee scheme launches next month, this may force rates on 90% mortgages down further.

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 2.99%, but you can get an 85% mortgage with a considerably lower rate of around 2.4%.

If you can save an extra 5% deposit, you can usually save around 0.5% 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 334 fixed-rate 85% mortgages for first-time buyers, compared to 244 90% deals.

computer screen showing mortgage application form

95% mortgages set to make a comeback

A few weeks ago, the likelihood of 95% mortgages returning anytime soon seemed remote, but the government’s new mortgage guarantee scheme is set to change that.

The scheme, which launches on 1 April, will see the government encourage lenders to offer mortgages for borrowers with a 5% deposit by taking on some of the financial risk involved.

Some of the UK’s biggest lenders have already signed up, and Yorkshire Building Society has jumped ahead of the queue by launching its own 95% mortgage.

It remains to be seen what rates will be available under the scheme. Theoretically lots of competition could bring low costs, but as we’ve seen with 90% mortgages, lenders are very risk-averse at the moment, so it could be a slow burner.

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 23 March 2021.

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