Mortgage cost gap continues to widen

THE gap between the best mortgage deals offered to buyers with deposits of 25 per cent or more and those with 10 per cent to put down is widening.

A number of leading banks and building societies have cut their fixed rates this week, but the bulk of the reductions have been for borrowers with equity of at least 25 per cent.

The average two-year fixed rate for a borrower with a 25 per cent deposit is now 4.27 per cent – the lowest level since last July, say Moneyfacts – but borrowers with deposits of just 10 per cent are seeing costs rise, with the average two-year fixed rate at 6.48 per cent, the highest since December 2008, when the Bank of England base rate was 2 per cent. Borrowers with a 10 per cent deposit typically pay 4,728 more over two years than those with 25 per cent, as lenders take a 4.85 per cent margin on 90 per cent loan-to-value deals, said Moneyfacts.