Mortgages: we do the spadework for those who need to dig deep

Mortgages: we do the spadework for those who need to dig deep

If they weren't suffering enough already, many first-time buyers face having to find thousands of pounds more for a deposit after some of Britain's leading mortgage lenders tightened their purse strings.

The move, which may prove a set-back too far for some, has seen Alliance & Leicester and Britannia Building Society telling new borrowers that they will have to pay a minimum deposit of 10% to get a mortgage. Previously, both had offered loans of up to 95% of the home's value. The changes mean a typical first-time buyer currently paying just under £150,000 for a home will now have to find an eye-watering £14,800 deposit.

Financial data provider Moneyfacts warned this week that other banks are also tightening their lending criteria - pushing up the cost of loans to anyone who can't put down a decent deposit.

Since the beginning of December, it says, 11 mortgage lenders have reduced the maximum loan-to-value (LTV) they offer on some or all of their mortgage range. Moneyfacts said this marks an "about-turn" from the position before the credit crunch, when lenders considered an LTV of 95% the norm, and some went as high as 130%.

With this in mind, Guardian Money has been looking at the best mortgage deals still available for those looking to borrow 100%, and those able to put down a 5% deposit.

Melanie Bien at independent mortgage broker Savills Private Finance says it is still possible to get a high LTV mortgage (above 95%).....continued below

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"but it is more difficult" than in the past. "Lenders are pricing for risk more keenly than before, as a result of the credit crunch, she says. "Those who are still offering high LTV deals are charging higher rates of interest for the privilege. There has always been a premium, but now it is more exaggerated."

She says that with Northern Rock "effectively out of the marketplace" (it still offers the 125% Together loan but at less competitive rates than its rivals), there is also less competition, "so rates are bound to be higher".

Several companies are still offering 100%-plus deals, though you generally have to be a "professional" or graduate to get a half reasonable deal. Bien points to Scottish Widows Bank's professional mortgage, which will lend 110%. Other companies still offering more than 100% include Coventry Building Society (up to 125%) at rates from 7.24%, and BM Solutions (up to 125%), with rates from 6.69%.

"It is questionable whether now is the right time to take out a high-LTV mortgage because house prices are falling in some areas," she says.

According to Richard Morea, technical manager at fellow broker London & Country, those able to come up with a 5% deposit will enjoy significantly better rates. Some deals have become cheaper in the past few days. He says the best 95%, two-year fixed rate deal is currently with Giraffe: 4.95%, though it comes with a hefty £1,499 fee.

Another one to look at, he says, is offered by the Co-op Bank. It has just launched a two-year discounted mortgage which is Bank of England base rate minus 0.01% (currently 5.49%) - attractive when you consider interest rates are likely to fall in the coming months.