The number of 95 per cent loan-to-value deals has risen to the highest level since the Prudential Regulation Authority sounded a warning about risky lending in May 2019, according to Moneyfacts.

The comparison site says there are currently 405 products available for borrowers with a 5 per cent deposit, which is the highest number recorded for any month since May last year when there were 413.

Average rates for two-year fixes at 95 per cent LTV have come down from 3.41 per cent to 3.22 per cent from last February to today.

Rates on five year fixes have come down from 3.78 per cent to 3.52 per cent over the same timeframe. 

Moneyfacts finance expert Eleanor Williams says: “As our data shows, the market has picked up since the intervention by the PRA last year, with the average 95 per cent LTV two and five-year mortgage rates falling by a notable amount. 

“Indeed, the rates available now are much lower than they were two or even five years ago when the average 95 per cent LTV mortgage was priced at over 5 per cent for both sectors – good news for prospective borrowers.”

She adds: “This seems to demonstrate that there continues to be competition among lenders in this ever-expanding section of the market. “This may in part be due to lenders trying to attract the increasingly young first-time buyers, who they may then be able to keep on their books moving forwards as they remortgage over the years.

“This is further supported by the fact that over the last year, the number of high LTV deals that are available to remortgage customers has increased by 5 per cent in both the two and five-year fixed rate sectors.”

Williams says that both two and five-year swap rates have fallen over the  past month, with both now standing at 0.66 per cent.

She believes there is scope for rates to fall further still.