More deals depend on larger deposits

WITH house prices in Scotland down 8.1 per cent last year, according to Nationwide, would-be buyers have a golden opportunity to get on the housing ladder at more affordable prices.

That's the theory at least, but there's a massive stumbling block. Your chances of getting a mortgage are rapidly diminishing unless you have a large deposit to put down – and the size of the deposit needed is growing by the week.

The number of mortgage providers asking for a 25 per cent deposit (75 per cent loan to value, or LTV) is now up to 60 per cent, according to Moneyfacts, which also found that more than a quarter of all mortgages on the market require a 40 per cent down payment.

Borrowers without that kind of deposit available have fewer mortgages to choose from, with just 21 deals for a deposit of 5 per cent or less, compared with 1,200 less than a year ago.

The continuing drift away from LTV levels that lenders fear could pose a risk further down the line is largely driven by the growing spectre of negative equity, according to Michelle Slade at Moneyfacts. "Lenders are worried about house prices, which have dropped massively year on year, so they are cherrypicking the best customers to avoid problems later on," she explained. "LTVs are gradually dwindling. Early last year the last 125 per cent deal went, now there is just a handful of 95 per cent deals remaining."

Now the prospect of needing a deposit for half the value of a property in order to get a mortgage becomes increasingly realistic, with the number of mortgages at 50 per cent LTV gradually creeping up.

So if you're looking to buy, what kind of deal could you expect to be offered, if any?

I have no deposit

There are still ten 100 per cent deals around, 247 fewer than there were just over a year ago. But the best fixed rate on offer, from Tipton & Coseley Building Society, is at 6.29 per cent, sky high even before it is compared with the current base rate. The solitary variable deal, a tracker from Northern Bank, is available only in Northern Ireland.

I have a 5 per cent deposit

This segment has shrunk dramatically in the past 14 months, from 1,126 deals to just 11. At the end of last summer there were still more than 70 mortgages at 95 per cent LTV, while four have disappeared in the last month alone. Now, with no variable deals at 95 per cent LTV, the best fixed-rate mortgage on offer is from Bristol & West, at 6.39 per cent.

I have a 10 per cent deposit

Between November 2007 and May last year the number of 90 per cent LTV mortgages halved to just over 600, while it's plunged from 586 to just 148 in the five months since last August. The three-year fix from Cheltenham & Gloucester is the most competitive deal in the 90 per cent LTV category, according to Moneyfacts, at 5.69 per cent with a 895 fee. The best variable rate is a 4.99 per cent tracker from Clydesdale Bank.

I have a 15 per cent deposit

The number of mortgages for those able to put down a 15 per cent deposit has grown, with 85 per cent LTVs the highest that many lenders are now prepared to offer. There are now 227 deals available at 85 per cent, up from 177 last August and 73 in May, said Moneyfacts, with the most competitive rates notably better than those on offer for buyers with a 10 per cent deposit only.

Coventry Building Society has a 4.99 per cent fix over three years, with a fee of 800, while the Co-operative Bank has a variable rate discounted to 4.54 per cent to the end of 2012.

I have a 20 per cent deposit

There are 158 deals to choose from, although the number available has fluctuated over the past year.

The best rate is a 4.79 per cent three-year fixed deal from Melton Mowbray (995 fee) while First Direct offers a 3.49 per cent tracker.

I have a 25 per cent deposit

Borrowers with a 25 per cent deposit were targeted in last summer's brief fixed-rate price war, taking the number of 75 per cent LTV deals over 700. It's since dropped to less than 500 as lenders have decided that not even 75 per cent LTV territory is risk-free enough for their best deals. Cheltenham & Gloucester currently has the most competitive fixed and variable rates here, at 4.49 per cent and 4.09 per cent (tracker) respectively.

I have a 40 per cent deposit

This is where lenders are increasingly concentrating their efforts, with 341 deals compared with just 23 last May and 249 only a month ago. If you can put down 40 per cent of the property value, Mansfield Building Society has a two-year fixed deal at 3.99 per cent and HSBC has a 3.64 per cent tracker.