MORTGAGE PRODUCT NEWS FROM LONDON MORTGAGE BROKER, LONDON MORTGAGE ADVICE. Wednesday, 23rd September 2009

Despite the cost of funding to lenders falling 4.35%, potential mortgage borrowers with a 10% deposit have seen just a 0.12% drop in the average mortgage rate.

Those with a 40% deposit, by comparison, have seen a 1.86% reduction in the average mortgage rate. Mortgage borrowers taking out a new two year deal on a £150,000 mortgage with a 10% deposit, will only see their monthly repayment fall £11 from £988 to £977, while those with a 40% deposit see a reduction of £165 per month from £998 to £833.

This is because there is a higher margin for risk is expected on a 90% LTV deal. However, a 4.25% margin over the cost of funding is excessive and seems difficult to justify.

If we look to mortgage borrowing two years ago, such was the competition that is led to 90% LTV deals being some of the most attractive rates on the market. Today, a 25% deposit remains the level where most lenders are willing to do business. Anything smaller than this and borrowers will pay a hefty price.

Mortgage borrower are being teased with below 2% rates by lenders, but we have no way of knowing how many borrowers actually qualify for these deals. Having been tempted through the door, many are likely to be offered much higher rates.

And first-time buyers, are now apparently being ignored as lenders continue to cherry pick lower risk borrowers. It appears borrowers searching out a new deal are paying a higher price to subsidise existing customers, many of which are paying record low rates