Lenders have launched 78 new deals at 95% LTV since the start of April, but average rates are 76 basis points higher than they were in March 2020 before the pandemic struck, according to Moneyfacts.

The launch of the mortgage guarantee scheme has tempted many lenders back to the market for low-deposit borrowers, some making use of the government support and some launching products independently of the initiative.

Borrowers with a 5% deposit now have 112 products to choose from, up from 34 at the start of the month, but still less than a third of the 390 deals available in March 2020.

Average rates for a two-year fixed in this tier have come down from 4.47% at the start of April to 4.02% now, but this is well above the 3.26% average in March last year.

In the 90% LTV tier, product numbers have increased from 440 to 480 since the beginning of the month, but remain well under the 779 on offer prior to the first lockdown.

Average rates for a two-year fixed at 90% LTV have dipped slightly since the start of this month from 3.45% to 3.42%, but they are still well above the 2.57% average in March 2020.

Borrowers who can manage to stretch their deposit to 10% could save up to £1,486 over two years or £3,379 over five years, based on a loan of £190,000 on a 25-year term.

Moneyfacts finance expert Eleanor Williams says: “As house prices and rents continue to climb, aspiring homeowners may have been waiting with bated breath for the launch of the government mortgage guarantee scheme, supporting those with small deposits to take on a mortgage. 

“Approximately a week on since the biggest lenders launched products into the scheme, our analysis shows how this has impacted the sector and why borrowers may still be wise to look at deals outside of the scheme.

“Indeed, of the 112 deals now on offer at 95% LTV, 72 do not sit inside of the mortgage guarantee scheme.

“Despite the influx of deals under the new mortgage guarantee scheme and the media attention they have received, the lowest rate available in the 95% LTV sector remains the five-year fixed rate Springboard mortgage from Barclays Mortgage priced at 3.45%. 

“As a guarantor mortgage, this deal requires family support for those with a limited deposit, so may be an option for some. 

“In comparison, the lowest deal (on a true cost basis, including fees) under the mortgage guarantee scheme is the two-year fixed rate Lloyds Bank 4% deal. 

“Borrowers looking to fix their repayments on a five-year fixed rate deal, and who are not able to get family assistance, may be interested to see that the lowest  product (on a true cost basis) does not sit under the new scheme and is priced at 3.89% from Coventry Building Society.

“Affordability may remain a concern with borrowers regardless of the new scheme and generally consumers will find much more choice and lower rates if they can stretch their deposit to 10%.”