A price war has broken out among mortgage lenders - seeing people with small deposits getting far better deals than 18 months ago.
Figures from Moneyfacts.co.uk show the average interest rates offered to buyers with a 5% deposit has fallen by more than a fifth since October 2017 - from 4.19% then to 3.30% now.
Darren Cook, Finance Expert at Moneyfacts.co.uk , said: “This is fantastic news for potential first-time buyers who are looking to find their first step on the housing ladder.
“It is evident that healthy competition among mortgage providers at the maximum 95% loan to value tier has been the catalyst in causing the average two-year fixed mortgage rate at this level to fall by 0.72% in the last year, down from 4.02% in March 2018 to 3.30% today."
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Bigger deposits offering smaller discounts
The financial analysis firm also looked into how much cheaper mortgages get when your deposit gets bigger.
It found the rate gap between the average two-year fixed-rate mortgage on the market for borrowers with a 5% deposit, and the typical two year-fix for those with a 10% deposit, is now at its smallest in six years.
There is now just 0.65 percentage point between them, the smallest Moneyfacts has seen since February 2013.
"The average two-year fixed rate at max 90% loan to value has changed little since October 2017, increasing by only 0.03% to 2.65% today. However, the average at max 95% loan to value has fallen by a significant 0.95% to 3.30% over the same period," Cook said.
But he also had a warning.
"Since the financial crisis, the Financial Conduct Authority has introduced clear affordability measures that mortgage providers must follow, so potential first-time buyers will still need to jump through several affordability hoops before they find themselves on the property ladder."
