19 top 90% mortgages!

There's hope for borrowers with a 10% deposit as new 90% mortgage deals hit the market.

Two years ago, the mortgage market was a different place from what it is today. Borrowers with a small deposit, or little equity in their homes, were stuck with super high mortgage rates. In fact, if you were after a 90% mortgage, and a fixed rate deal, you could be hit with rates in excess of 7% at some of the UK’s largest lenders including Abbey, Bradford & Bingley and Northern Rock.

Thankfully, since that time, things have started to look a little better. Hope is indeed on the horizon as Yorkshire Building Society has recently launched a range of new fixed-rate deals for borrowers who are after a 90% loan-to-value (LTV) mortgage.

The Yorkshire has a pretty good reputation in the high LTV loan arena. Just a few weeks ago, the lender introduced a two-year fixed rate deal specifically for first-time buyers with a 10% deposit at a rate of 5.99%.

This wasn’t the lowest rate available at the same, but the deal came with several attractive features including a free valuation, free legal service and free buildings & contents insurance for the first year. Better still, there was no product fee to pay either, and the mortgage came with £500 cashback.

Since then, new deals from the lender offer even better rates as the table below shows:

Top 90% mortgage deals: 2-year fixes

As you can see, the Yorkshire has unveiled yet another best-buy with a two-year fixed rate which breaks through the 5% barrier. This top deal is available to all borrowers including first-time buyers and remortgagers alike.

But this is not a fee-free mortgage. Borrowers will need to pay £195 upfront, while the remaining £800 of the product fee will be added to your loan on completion. This means you’ll have to pay interest on the lion’s share of the fee throughout the mortgage term, making it more costly. It’s a shame there’s no option to pay the full fee out of your own pocket should you wish to do so.

You also should bear in mind that both deals come with an early repayment charge of 3% which remains in place for the first two years. If you don’t remortgage after this period, the Yorkshire’s standard variable rate, which is currently 4.99%, will kick in.

There are two more fixed-rate deals which scrape in below 5%, but charge cheaper product fees. The two-year fixes from Britannia and the Co-operative Bank offer a decent rate of 4.99% and a lowish fee of £499 which includes a non-refundable booking fee of £150.

You should note that these particular deals are only available in branches or over the phone.

There's no question that the top 90% LTV rates are starting to look a bit healthier at last. But it makes sense to think twice before you’re swayed by these best-buys. After all, these deals will only guarantee your mortgage outlay for the next two years.

Of course, mortgage rates are already as low as they’re ever likely to get. After the two-year deal is up, you may need to remortgage to a new rate, or else move onto the standard variable rate. Both options could feasibly come with rates which are far higher than where they are now.

I think borrowers who prefer fixed rates would be better off going for a five-year deal instead even though the rates are higher. It’s true there’s still no way of telling where mortgage rates will be in five year’s time. But this longer period will give you more time to chip away at your total mortgage debt, and potentially reduce your LTV giving you the prospect of keener rates in the future when you come to remortgage.

If you like the sound of that, here are the top five-year fixes, again at 90% LTV:

Top 90% mortgage deals: 5-year fixes

The best rates are from the Britannia and Co-operative Bank at 5.89% with a reasonable fee of £499. As per the two-year version, the product fee includes a non-refundable booking fee of £150. You should note that these deals aren’t available to remortgagers.

The lenders also offer a fee-free version, but this will see the rate rise from 5.89% to 6.19%.

Meanwhile, the Post Office is fairly new to mortgage lending, but its five-year fix is pretty competitive at 5.99%. Early repayment charges of 5% of the sum repaid will apply for the first five years. After this time, the rate will revert to a variable rate which is the base rate + 2.99% (current pay rate 3.49%).

The version of the deal with a higher rate of 6.29%, shown at the bottom of the table, offers a free valuation for all borrowers and no legal fees for remortgagers only.

For those who are interested in tracker deals, we’ll take a brief look at those next (only two-year deals are shown as there are no five-year options currently available at 90% LTV):

Top 90% mortgage deals: 2-year trackers

It’s fair to say the 90% tracker mortgages don’t compare too favourably with the two-year fixes. In fact, more than half of the current tracker pay rates shown are already higher, and can only move upwards from here on in. There are some fantastic tracker deals available for borrowers with a lower LTV, but there’s still a long way to go yet in this specific area of the mortgage market.

That said, the two best-buys from Newcastle BS and Skipton BS do beat the top two-year fix from Yorkshire BS, but the question is how long will this remain the case? My guess would be that at the end of the two-year period, borrowers would have paid less overall by choosing Yorkshire BS, than they would have done with either of the two top trackers deals.

Find the right mortgage for you at the lovemoney.com mortgage service

More: 30 must-have mortgages, whatever your deposit | Why you should ditch the SVR

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 4045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term will revert to the lender's standard variable rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.