Buyers with smaller deposits lose out on interest rates

November 25, 2016 by Brendan

Rates

Following the EU referendum and the decision to leave the European Union, the interest rate gap between those with a low deposit and borrowers with a higher deposit, is at a 12-month high.

Since the Bank of England decided to reduce the base rate, mortgage interest rates have fallen across the board, making it cheaper than ever to take on a mortgage. However, Brexit has created uncertainty which has resulted in lenders favouring borrowers with a higher deposit.

For those people with a 5% deposit, the average interest rate has fallen by a margin of 0.05%, while the average interest rate for buyers with a 25% deposit has fallen by 0.15%. This has meant that the gap between rates for borrowers has increased to 2.24%.

The difference may mean that those with lower deposits, in particular first buyers, are paying out far more during per year in comparison to someone with a higher deposit. For instance, a buyer with a 5% deposit will save around £384 a year compared to 12 months ago, while a borrower with a 10% deposit will save an average of £528 a year.

This indicates that it is important for buyers to save up for the highest deposit they can possibly afford, so they have access to these lower mortgage interest rates. CeMAP qualified mortgage advisers have the knowledge to help buyers find the most suitable mortgage and maximise savings, especially during the early years of the loan.