Santander, Nottingham Building Society and Skipton Building Society have become the latest lenders to relaunch 90% mortgages for first-time buyers.
The number of low-deposit mortgages on the market has risen significantly in the past couple of months, but rates remain much higher than before the pandemic.
Here, Which? reveals the best rates available to first-time buyers and gives advice on buying your first home in 2021.
Low-deposit mortgages return for first-time buyers
Nine in 10 90% mortgages were withdrawn from the market in the wake of the COVID-19 outbreak last spring.
Nearly a year on, first-time buyers have finally been handed a boost, with the majority of major lenders now offering low-deposit deals again.
Santander, Skipton and Nottingham have all relaunched 90% deals in the past week, while Nationwide and HSBC have cut their rates (links take you to our independent reviews of each lender).
This means there are now 146 fixed-rate 90% mortgages now available to first-time buyers, compared to just 88 at the start of December.
What does this mean for rates?
More choice is great news for first-time buyers, but at this stage there’s no sign of rates falling back towards those seen before the pandemic.
Lenders are very much proceeding with caution by bunching their deals together, with no one so far offering a truly headline-grabbing rate.
For example, on two-year fixes, Leeds, NatWest, Barclays, Yorkshire Building Society and Lloyds are all offering rates between 3.44% and 3.48%.
It’s a similar story for five-year deals, with HSBC, NatWest, Yorkshire, Halifax and Metro Bank pricing their deals between 3.54% and 3.59%.
The graph below shows how the average rate on 90% deals has dropped recently but remains significantly higher than before the pandemic.
Best rates on 90% mortgages
Two-year fixed-rate deals
The best rate currently available on a two-year fix is from Penrith Building Society, but you can only apply for this deal if you live in Cumbria. Cumberland and Furness also offer very competitive rates limited to their local areas.
The cheapest nationally available deals start at 3.24%, well above the 1.8% recorded before the COVID-19 outbreak last March.
As the table below shows, there’s little to choose between the cheapest five deals.
| Lender | Initial rate | Revert rate | Upfront fee | Cashback |
| Nationwide | 3.24% | 3.59% | £999 | £500 |
| Coventry | 3.29% | 3.99% | £999 | None |
| Virgin Money | 3.29% | 4.34% | £995 | £500 |
| Hinckley & Rugby | 3.39% | 4.24% | £999 | None |
| HSBC | 3.39% | 3.54% | £999 | None |
Note: Data from Moneyfacts, 26 January 2021.
Five-year fixed-rate deals
Five-year deals usually have higher rates than two-year deals because they offer a longer period of rate certainty. But now, the gap in cost between two and five-year fixes is just 0.15%.
Platform offers the best initial rate (3.39%), albeit with a higher upfront fee than its competitors.
| Lender | Initial rate | Revert rate | Upfront fee | Cashback |
| Platform | 3.39% | 4.34% | £1,499 | £250 |
| Nationwide | 3.44% | 3.59% | £999 | £500 |
| Nottingham | 3.45% | 4.24% | £999 | None |
| Virgin Money | 3.46% | 4.34% | £995 | £500 |
| Skipton | 3.47% | 4.64% | £995 | None |
Note: Data from Moneyfacts, 26 January 2021.
Will 90% deals get cheaper?
If you’re thinking of getting a 90% mortgage, it might pay to wait a little longer.
We’ve already seen a couple of banks cut their rates, and as demand from first-time buyers rises, so too may the competition to offer the cheapest deals – resulting in lower costs.
We’ve got loads of mortgage advice, from how to find the best deal to our how much mortgage can I borrow? calculator.
Is it worth saving more to get a lower rate?
Generally speaking, the bigger your deposit, the cheaper your mortgage rate.
The cheapest two-year 90% fix is priced at 3.24%, but you can get an 85% mortgage with a considerably lower rate of around 2.6%.
If you can save an extra 5% deposit, you can usually save around 0.6% to 1% on your rate, meaning you could make substantial savings on monthly payments in the long run.
Buyers with bigger deposits also tend to have more choice. Right now, there are 275 available 85% mortgages for first-time buyers, compared to 146 90% deals.
Are 95% mortgages likely to make a comeback?
It’s likely to be some time before we see 95% deals come back to the market.
At the start of March last year, there were 391 95% deals available for first-time buyers – this month it’s dropped to just four – and none are widely available.
With the pandemic continuing, it seems highly unlikely that 95% mortgages will return in a big way in the coming months.
If you’re looking to buy a home with a 5% deposit, you may be best considering schemes such as Help to Buy – which will be relaunched with new price caps this April – or looking into options such as guarantor mortgages.
How to buy your first home in 2021
It’s a tough time to get on the property ladder, with the pandemic bringing uncertainty and the stamp duty holiday resulting in rising house prices.
We’re here to help with all the advice you need, whether you’re putting money aside for a deposit or are ready to apply for a mortgage.
As a starting point, check out our step-by-step guide to buying a house, which takes you on the journey from saving a deposit to exchanging contracts.
If you’re struggling to get to grips with mortgages, we’ve got lots of advice on the different types of deal, how much you can borrow and how to apply.
Finally, why not check out our mortgage lender reviews, which combine customer ratings with our expert analysis to identify the UK’s best mortgage lenders?
