More mortgages on offer for small deposit

The proportion of mortgages available to people with small deposits has risen to its highest level for two years but there is little sign that banks are increasing their lending levels, research indicated.

Loans that require borrowers to put down a deposit of at least 25 per cent of their home’s value now account for less than half of the market for the first time since January 2009, according to financial information group Moneyfacts.

Mortgages that require a deposit of this size now account for 46 per cent of all available deals, with loans which accept smaller sums or no deposit at all accounting for the remaining 54 per cent.

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Borrowers with a 20 per cent deposit have seen a three-fold increase in the number of deals they can choose between in the past two years, with these rising from just 97 in February 2009 to 390 now. There has also been a rise of just over 250 per cent for people with 15 per cent to put down, with 560 loans now available, while choice for borrowers with just a 10 per cent deposit has more than doubled, rising from 94 products two years ago to 214 now.

The only area of the market where choice has declined is for people with a 40 per cent deposit, with the number of loans for these borrowers falling by 28 per cent, as lenders instead make their best deals available to those with 25 per cent or more to put down.

Overall, the number of different mortgages on the market has more than doubled in the past two years, rising from 1,097 to 2,447.

But Moneyfacts cautioned that the increase in choice for people with smaller deposits did not necessarily mean lenders were more willing to advance money to these customers.

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Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: “Although lenders’ windows may be full of best buy deals, it doesn’t mean they are wanting to lend.

“The increase in the number of mortgage deals for those with smaller deposits is encouraging, but only a limited number of such mortgages are likely to be approved.

“Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they will accept.”

She added that banks and building societies’ lending criteria was likely to get even tighter in future as they implemented tough affordability checks which are being proposed by the Financial Services Authority.

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