Coventry Building Society becomes latest lender to bring back 10% mortgages in a boost for home buyers seeking low-deposit deals
- UK’s second-largest building society is re-entering 90% loan-to-value market
- These mortgages are popular with first-time buyers and movers with low equity
- Low-deposit products were pulled by almost all lenders in 2020 due to Covid
- Providers such as NatWest, Halifax and Barclays have also reinstated their deals
Britain’s second-largest building society has started offering 10 per cent deposit mortgages to home buyers again, after pulling its previous products due to the pandemic.
Coventry Building Society revealed it would reinstate the low-deposit products, which are most frequently used by first-time buyers and movers with low equity.
Products being offered include a rate of 3.29 per cent on a two-year fixed deal, with a £999 fee and early repayment penalties for the duration of the fix.
Lower-deposit mortgages are often used by first-time buyers trying to get on the ladder
A rate of 3.69 per cent is being offered for a five-year fixed deal, with a £499 fee and no early repayment charges.
These are both available for purchase, remortgage, product transfer and further advances.
Maire Cassidy, senior mortgage manager at Coventry Building Society, said: ‘High LTV mortgages are vital for a significant part of the market – not just first time buyers but also those people with a smaller deposit who are looking to move or find a new mortgage deal for their home.
‘We feel it’s the right time to support the 90 per cent LTV market by providing more choice for borrowers.’
Lenders cited various reasons for taking their low-deposit deals off the market earlier this year, from struggling to cope with demand for mortgage holidays to staff working from home.
There were also concerns about homeowners falling into negative equity if house prices fell and unemployment increased.
Is it a good deal?
Coventry Building Society is the UK’s eighth-largest lender, and has more than two million members.
Although its new 10 per cent deposit rates are not the lowest on the market, they are broadly in line with those offered by comparable banks and building societies.
NatWest recently launched a two-year fixed deal at a higher rate of 3.55 per cent with a £995 fee, but its five-year fixed product has a slightly lower rate than Coventry’s at 3.6 per cent and a £995 fee.
Meanwhile, Yorkshire Building Society is offering a higher 3.69 per cent two-year fixed rate with a £995 product fee, and a higher 3.79 per cent five-year fixed rate with a £995 product fee.
The digital-first challenger bank, Atom Bank has some of the most competitive rates on the market, offering 3.09 per cent on a two-year fixed deal with a £1,500 fee and 3.24 per cent with the same fee for its five-year fix.
However, the interest on all of these is still much higher than what you would pay if you had a larger deposit.
For example, those able to pay 40 per cent of the value of their home upfront could get a rate of 1.17 per cent on a two-year fixed deal with a £999 fee at Lloyds Bank.
Are things getting better for those with small deposits?
Lenders are trickling back in to the low-deposit mortgage market, but the number of products on offer is still much lower than before the pandemic.
According to figures released by comparison site Moneyfacts, there were around 160 deals available for home buyers looking to purchase a property with a 10 per cent deposit in December, down from 779 in March.
Those with only a five per cent deposit will find it even more difficult to get a mortgage, with only eight on the market and most of these requiring a guarantor, according to Moneyfacts.
In more positive news, mortgage rates increased significantly during 2020, but there are now signs that they are beginning to creep down.
