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95% LTV Mortgage Rates and Deals

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 25, 2021

Government schemes and specialist mortgage products are helping people get onto the property ladder with just 5% deposit to their name, but many who are borrowing under these circumstances are worried about being hit with high interest rates.

But the good news is that, with the right advice, it’s still very much possible to get a favourable deal on a 95% loan-to-value (LTV) or 5% deposit mortgage, and this guide will tell you how to find it, as well as give you an idea of the rates on offer.

Do 95% loan-to-value mortgages come with higher rates?

Yes, this is usually the case. Low-deposit mortgages are generally considered to be higher risk by most mortgage lenders, so they up their rates on these products to safeguard themselves. Given that 5% deposit is the lowest you’d be approved with under most circumstances, 95% LTV mortgages tend to come with the highest rates on the market.

Research carried out by Moneyfacts.co.uk, found that the average interest rate on a 95% LTV mortgage with a two-year fixed rate was 4.47% on 1st April 2021. This is compared to an average interest rate of 3.45% for 90% LTV products with the same fixed rate.

The same data suggests that the average interest rate for a 95% LTV mortgage with a five-year fixed rate in the UK was 4.32%, while its 90% LTV counterpart was at 3.64%.

Is this always the case with 5% deposit mortgage rates?

Not exclusively. Keep in mind that 95% LTV mortgage deals aren’t the only way to get a mortgage with 5% deposit. There are specialist products and government schemes that can help you get onto the property ladder with little deposit and more equity.

For example…

  • Help to Buy: Now exclusive to first-time buyers, the Help to Buy equity loan scheme can help you buy a house with 5% deposit by giving you access to a government loan worth 20% of the property’s value (more than this in London). This means you’d end up with more equity, potentially superior rates, but an extra debt to settle. You can read more about this in our complete guide to Help to Buy mortgages.
  • Guarantor mortgages: If you have a 5% deposit made up of your own funds and a family member who’s willing to support you financially, a guarantor mortgage could help you get onto the property ladder with more equity and more favourable rates, depending on your guarantor’s creditworthiness and the value of the assets they’re securing your mortgage against. Read more in our guarantor mortgages guide.

Although there are fall-back options for customers with 5% mortgage deposits, bear in mind that not all 95% LTV mortgages come with sky-high interest rates. While the rates on these products can be higher on average, it may be possible to secure a deal with a lower-than-average interest rate. Jump ahead to the next section to find out more about the factors which affect the mortgage interest rate you’ll ultimately end up with.

Factors that affect interest rates

The exact amount you’d pay in interest on a 95% LTV or 5% deposit mortgage isn’t necessarily a fixed amount. Your mortgage lender will work out what kind of rates and deals you qualify for based on your creditworthiness and the strength of your application.

They will calculate this based on the following factors…

  • Your credit report: Clean credit can help you get the best rates available on a 95% LTV mortgage. Having bad credit of any kind often means having to seek professional advice before applying for a mortgage, especially if you only have 5% deposit.
  • Income: The more you have, the better. Some lenders prefer customers in full-time employment, and will expect you to be able to prove your income with 2-3 years’ worth of accounts if you’re self-employed. Specialist advice is recommended if you’re self-employed with less accounts than that or have complex income.
  • Outgoings: Having significant outgoings may impact affordability. If your debt-to-income ratio is high, this might limit the number of approachable lenders.
  • Age: It can be more difficult to get the best interest rates if you’re approaching 75 or if the mortgage term runs into your retirement years. This usually calls for expert advice from a mortgage broker who specialises in later-life lending.
  • Property type: It can be more difficult to get the best rates on a ‘non-standard’ property, even if you have more than 5% deposit. This includes anything that isn’t made from bricks and mortar, listed buildings, high-rise properties and more.

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How to find the best rates and deals on 5% deposit mortgages

Getting the best rates and deals on a 5% deposit mortgage comes down to two things: meeting the eligibility requirements at as many mortgage lenders as possible, and having access to every product available in this corner of the market.

You can read about some of the factors that determine your eligibility in the previous section, but market access is exactly the kind of thing we can help you with. We can match you with a mortgage broker who specialises in arranging 95% LTV and 5% deposit mortgages. This will be an advisor who has a deep working relationship with all of the lenders who offer them and a strong track record of arranging them for customers like you.

Applying through a mortgage broker who helps customers with low deposits every day is by far the best way to secure the most favourable rates and deals available. With their guidance, you can rest assured that you will be introduced to the right lender first time.

Approaching the wrong lender is one of the most common reasons people end up paying over the odds in interest. If you were to go it alone and end up with a mortgage provider who doesn’t cater for low-deposit customers particularly well, you might end up having to settle for an unsuitable mortgage deal or be turned away altogether.

Being declined for a mortgage can be just as damaging to your prospects, as this can impact your credit report and make securing the best rates with the next lender even more unlikely. But if you apply through the right broker, this is something you won’t have to worry about.

Mortgage broker-exclusive deals

Another reason to use our broker service if you’re looking for the best 5% deposit or 95% LTV mortgage deals is because the advisors in our network often have access to exclusive deals that aren’t available to the general public. In fact, many of the 95% LTV mortgage products that were reintroduced to the market in 2021 are broker-exclusive deals.

Given that 95% LTV mortgages are still relatively scarce, the extra product choice a broker can offer you is essential if you’re hoping to lock down the best interest rate.

What’s the cheapest 95% LTV mortgage available?

There’s no definitive answer we can give here. If we were to cite the “cheapest” interest rate available on a 95% LTV mortgage right now, it could be outdated within minutes since mortgage interest rates are forever in flux and can shift at any time. Also keep in mind that the lowest interest rate for you isn’t necessarily the same as it is for the person next door, as the products and deals that you qualify for might vary, based on your eligibility.

Another relevant point here is that the “cheapest” 95% loan-to-value mortgage product and the one with the lowest interest rate might not be one and the same. There are also product fees to factor into the total cost. There’s no point taking out a deal with a low interest rate if it means paying well over the odds in up-front fees and ending up out of pocket overall.

What we can tell you is how to make sure you’re getting the most cost-effective deal to you: speak to a broker who specialises in arranging 5% deposit mortgages. They will do all of the legwork rounding up the best products that you qualify for and work out the overall cost of each of them, so you can make an informed decision about which one is for you.

How to compare 95% LTV mortgages

One of the most common mistakes people make when searching for the best 95% LTV or 5% deposit mortgage deals is comparing the market the wrong way. You won’t get a full picture of the products on offer by carrying out a quick Google search, or even a thorough one.

Internet rates tables and other online tools are rarely whole-of-market, they aren’t bespoke to you and your needs, and often give prominent placement to sponsored products. They’re fine for a rough idea of what’s available, but if you’re serious about landing the best rates, speaking to the right mortgage broker is a better way to go about things.

The brokers we work with not only have access to the entire 95% LTV market, they can give you bespoke product advice and have deep working relationships with the lenders who offer these products, which sometimes means they can negotiate an exclusive deal for you.

With the help of a broker from our network, you can rest assured that you’ll get a full comparison of the entire market, including exclusive 5% deposit mortgage deals that aren’t available to the public. Your broker can go through every product that you qualify with you and help you make an informed decision about which one to choose.

They will compare the top 95% LTV and 5% deposit mortgages available, including…

  • 2021 mortgage guarantee scheme deals
  • New 95% LTV mortgages (products relaunched since the COVID-19 pandemic)
  • Help to Buy equity loan mortgages
  • Guarantor mortgages (if applicable)
  • 5% deposit mortgages through other viable government schemes

Speak to an expert

We offer a free broker-matching service that can pair you up with the perfect advisor for your needs and circumstances. This will be someone with exactly the right knowledge and experience you need, as well as a strong track record helping people with 5% deposit.

Call 0808 189 2301 or make an enquiry and we’ll set up a free, no-obligation chat between you and your perfect mortgage broker today.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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