The mortgage outlook is becoming a little brighter at last for homeowners who have little equity in their homes or first-time buyers with small deposits.
Mortgage brokers are reporting rate cuts even where a homebuyer or remortgage customer has "only" a ten or 15 per cent deposit.
Newcastle Building Society, for instance, has launched a two-year tracker mortgage and a two-year fixed-rate deal for borrowers who have only ten per cent deposit or equity.
Right decision: Remortgaging means that Nigel Hall, left, and Tom Emery, are paying less interest
The tracker has a starting pay rate of 4.6 per cent - it tracks at 4.1 percentage points above the Bank of England base rate - and the fixed rate is 5.95 per cent.
The move follows HSBC, which has launched a lifetime tracker at 4.49 points above the base rate, giving a pay rate of 4.99 per cent, also available for borrowers with ten per cent deposit or equity.
Leek and Yorkshire building societies have also announced competitive rates for borrowers with at least 15 per cent equity. Leek"s twoyear fix, for example, is at 4.79 per cent while Yorkshire has a fiveyear fix at 5.69 per cent.
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"The rate cuts for high loan-to-value mortgages are really encouraging," says Richard Morea, broker at London & Country Mortgages in Bath, Somerset.
"There is still a big differential between the rates for borrowers with 15 per cent equity and those with 40 per cent, for example, but any improvement to rates and choice of product is good news."
Six months ago, a borrower with only 15 per cent deposit could get a best-buy two-year tracker with a starting rate of 4.69 per cent. Today, the best equivalent rate is 4.19 per cent. Six months ago, the best two-year fixed rate at the same loan-to-value was 5.69 per cent. Now it is 4.79 per cent - a drop of 0.9 percentage points.
Though the best short-term tracker and fixed deals for borrowers with 40 per cent equity have also fallen during the same period, the rate cuts have not been as big.
Melanie Bien, director of independent mortgage broker Savills Private Finance in central London, welcomes the recent rate cuts but says people must act fast.
She says: "Lenders typically start the year aggressively with competitive rates and cut back on lending later, so now could be the time to bag a good deal if you know you want a fixed rate or tracker."
Millions of borrowers are paying their lender"s standard variable rate after coming off low fixed and discounted deals in the past year.
But some SVRs are on the rise. Skipton Building Society caused outrage last month by announcing it was lifting its rate from 3.5 per cent to 4.95 per cent. The troubled society had to rely on an "emergency clause" buried in mortgage contractsto impose the huge increase.
Accord (part of Yorkshire Building Society), Ecology, Hanley Economic, Norwich & Peterborough and Holmesdale building societies have all increased their SVR in recent weeks. Other lenders will probably follow, warns Michael White, managing director at broker Email Mortgages.
"While many SVRs are lower than the best fixed rates on offer, borrowers who are worried about rising rates and mortgage costs should think about trying to find a good deal soon," says White.
"With a variable loan, the borrower is at the whim of the lender who may decide to increase the rate even when the base rate stays put."
Tom Emery, 31, a human resources manager from Stockport, Cheshire, and his partner Nigel Hall, 31, a teacher, recently remortgaged from Skipton Building Society to Accord.
Nigel and Tom own 15,000 equity in their 100,000 three-bedroom terraced home. Though this limited their loan choices, Tom says the market has improved. "If we had a bit more equity the rates would have been more competitive," says Tom, "but when I remortgaged I wanted to release some equity to pay to my parents. They helped me on to the housing ladder five years ago."
Tom and Nigel have taken a two-year tracker loan at 4.29 percentage points above base rate, giving a starting pay rate of 4.79 per cent. Among the advantages of the deal are no upfront fees and both legal costs and valuation fees refunded.
"If we had stayed on Skipton"s SVR we"d be paying more interest now than on our tracker deal," adds Tom, "so I think we made the right decision."
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