Which banks offer 95% mortgages? Overview of major lenders

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  • If you’ve managed to save a small deposit for a home, you might be wondering which banks offer a 95% mortgage. These mortgages used to be like gold dust to be found at one time, but now there are plenty of banks offering them.

    A 95% mortgage refers to the loan-to-value ratio when you buy a home. If you have a 5% down payment, you will need to borrow 95% of the property value to purchase a property.

    For example, if you have saved a deposit of £10,000 and want to buy a house for £200,000, you will need to borrow £190,000 (95% of £200,000).

    Your borrowing choices generally become more limited and more expensive the smaller your deposit and therefore the higher your LTV. This is because there is more risk for the lender.

    Image credit: David Giles

    Martin Stewart, Director of London Money, explains: “For higher loan-to-value mortgages, there is perceived risk from a lending perspective. There is little commitment (or incentive) for the consumer to maintain payments if something goes wrong and the last thing a lender needs is a queue of borrowers returning the keys. Therefore, accessibility criteria, underwriting, and ratings are generally more intrusive and rigid when the buyer’s deposit is low.

    “There is also a risk of negative equity with these products. It wouldn’t take much of a negative move in house prices for the mortgage to be higher than the value of the property. This will have a lot of ripple effects for the lender and the borrower.

    The good news is that the 95% mortgage market looks pretty healthy right now. According to Moneyfacts, there are nearly 100 95% mortgages on the market. This could be due, in part, to the introduction of the government’s mortgage guarantee scheme (more details below).

    Which lenders offer 95% mortgages?

    Some lenders offer 95% mortgages under the government’s mortgage guarantee program, while others offer them outside of the program.

    Borrowers will see little difference between mortgages secured by the Mortgage Guarantee Plan and other 95% mortgages. Everything works exactly the same way: you put down a 5% deposit, then borrow 95% of the value of the property and repay it over the agreed term.

    The following banks participate in the Mortgage Guarantee Scheme to offer 95% mortgages:

    • Barclays
    • HSBC
    • Lloyd’s
    • natwest
    • Santander
    • blank silver

    Under the terms of the program, these lenders must include a five-year fixed rate mortgage in their product lineup.

    What is the Mortgage Guarantee Plan?

    The government launched the mortgage guarantee program in April 2021 and it is expected to last until December 2022.

    The pandemic has virtually wiped out 95% of mortgages and the program’s goal is to re-engage lenders in this part of the mortgage market. The government does this by “guaranteeing” part of the amount banks lend to mortgage borrowers.

    Mark Harris, managing director of mortgage brokerage SPF Private Clients, said: “Lenders buy the collateral from the government; this compensates lenders for potential losses if a property is repossessed. Borrowers must always meet the lender’s criteria and affordability assessments.

    “The Mortgage Guarantee Scheme has increased the availability of low deposit mortgages. Additionally, it allows unsecured lenders to enter the space knowing that they are not the only option available and therefore too exposed.

    Clean room with computer

    Image credit: Future Plc

    Under the Mortgage Guarantee Program, borrowers can access mortgages with a 5% deposit, which means they can borrow at 95% LTV. As with traditional mortgages, borrowers will need to pass affordability and credit checks to be offered a mortgage.

    The program reduces mortgage risk by 95% for participating mortgage lenders, allowing them to offer more mortgages at this LTV and at cheaper rates than before.

    The Mortgage Guarantee Program is available to first-time buyers and movers who are buying a property to live in (not buy-to-let). New builds and existing properties priced up to £600,000 are eligible.

    Lenders offering 95% mortgages outside the mortgage guarantee scheme

    Mortgage lenders may also offer 95% mortgages separately from the mortgage guarantee plan. What’s on offer changes all the time, but the following lenders were offering 95% mortgages at the time of writing:

    • Accord Mortgages
    • Aldermore
    • Atom Bank
    • Cambridge Building Society
    • Clydesdale Bank
    • cooperative bank
    • Coventry Building Society
    • Cumberland Building Society
    • Dankse Bank
    • Direct premiere
    • Halifax
    • Hinckley and Rugby Building Society
    • Kensington
    • Leeds Building Society
    • Leek Construction Company
    • Loughborough Building Society
    • Metro Bank
    • Monmouthshire Building Society
    • At national scale
    • Newcastle Building Society
    • Progressive Building Society
    • Trust Bank
    • Royal Bank of Scotland
    • Saffron construction company
    • Skipton Building Society
    • Suffolk Building Society
    • Tipton & Coseley Building Society
    • TSB
    • Vida Home Loans
    • West Brom Building Society
    • Bank of Yorkshire
    • Yorkshire Building Society

    What kind of rate can I expect to pay for a 95% mortgage?

    You will normally pay a higher interest rate on a 95% mortgage than if you had a larger deposit.

    Mark Harris, managing director of mortgage broker SPF Private Clients, says: “The larger your deposit, the less you’ll usually pay for your mortgage. For example, two-year patches at 70% LTV are available starting at around 2.2% (NatWest) while this rises to 2.42% for 90% LTV (NatWest) and 2.69% for 95% (Nationwide).

    For more examples of current rates, Barclays offers a 95% mortgage at 2.77% fixed for two years, with no product charges. Monmouthshire Building Society has a two-year rate set at 2.39% with a fee of £1,149.

    Five-year fixed rates tend to be more expensive. Barclays has a five-year fixed rate at 3.04% (no charge) and Dankse Bank at 2.85% (£999 charge).

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