Experts predict return of the 10% deposit mortgage

After a dramatic fall in the number of 90% and 95% mortgages available in 2020, experts have hinted at a return to the market of low deposit products – along with the possibility of interest rate cuts.

Low deposit mortgages almost disappeared in 2020 as the financial impact of the coronavirus pandemic saw increased caution by lenders. According to the comparison site Moneyfacts, there are currently 160 mortgage products requiring a 10% deposit compared to 779 in March last year. When it comes to 95% mortgages, you’ll struggle to find more than eight – compared to 391 a year ago.

David Hollingworth of L&C mortgages said: “Numerous high street lenders have now launched deals into the 90% [market] with the likes of Halifax, Barclays and NatWest all returning.”

Mortgage brokers believe that increased competition in the market could lead to lower rates too. Chris Sykes, consultant at Private Finance said: “With major lenders such as Nationwide and TSB beginning to make cuts, we expect others to follow as lenders pitch for business. Providing there are no major shocks to the economy or housing market, rates will continue to fall – but it will take a while to reach pre-pandemic levels.”

Bank of England figures show UK mortgage approvals at a 13-year high following the sales boom driven by the government’s stamp duty holiday. The data shows mortgage approvals leapt to 105,000 in November – the highest figure since August 2007, just before the financial crisis.

Experts have also predicted a relaxation of rules, which excluded furloughed workers, the self-employed and first-time buyers from the market. Andrew Montlake of Coreco mortgage brokers said: “In the second half of the year, we will see some return to normality with lenders easing some of their pandemic criteria. We should therefore see higher levels of first-time buyers and the self-employed able to get back into the mortgage market.”

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