No deposit, no chance

New figures from moneysupermarket.com reveal the extent of the disparity between supply and demand of mortgages at a high loan to value (LTV).

There are only 163 mortgage products available for borrowers with a 10 per cent deposit (90 per cent LTV), accounting for just six per cent of the whole market. And yet 17 per cent of moneysupermarket.com mortgage channel users are looking for products in this range. What's more, it is 30 per cent more expensive to borrow at 90 per cent + LTV than under 75 per cent.

First Time Buyers

Although house prices have fallen the lack of supply of high LTV loans is a particular concern for First Time Buyers (FTBs). To have a good chance of getting a mortgage at a competitive rate of interest FTBs will need to have saved a deposit of many thousands of pounds.

Homeowners

House prices have now fallen 19 per cent since the peak in 2007. This means anybody who bought their house in the past few years with a LTV of 75 per cent or less will now either be in negative equity of have less than 10 per cent equity. Many of these borrowers are effectively trapped with their existing lender until house prices rise again or unless they can make overpayments to reduce their mortgage.

Louise Cuming, head of mortgages at moneysupermarket.com, said; "Despite falling house prices, finding a large deposit is no mean feat, we're generally talking about many thousands of pounds. It is a shame lenders continue to be so equity focused - if an applicant can prove they are able to afford repayments, they should be trusted with the mortgage.

"Not only will those with smaller deposits find it harder to get a mortgage, but when they do they are likely to be charged a higher rate. The average rate for mortgages at 90 per cent + LTV is 6.26 per cent, however if you have a bigger deposit you will be charged much less. The average rate for a mortgages between 75 and 89 per cent LTV is 5.1 per cent, and the average rate for a mortgages between 60 and 74 per cent LTV is just 4.8 per cent - making it 30 per cent more expensive to borrow at 90 per cent + LTV than under 75 per cent.

"Prospective borrowers should look to save as large a deposit as possible before making their move into the market. Building a 20 per cent deposit is likely to mean significantly lower monthly repayments."