A mortgage price war could be in the offing as banks flood the market with fresh deals. Hinckley & Rugby Building Society launched a two-year discount variable mortgage at 0.99% this month, the first sub-1% rate in a year. Meanwhile, a raft of state-backed 95% mortgages went live on Monday, Nationwide is boosting the amount first-time buyers can borrow and Santander is relaxing criteria for the self-employed. Experts say the surge in offers is a vote of confidence in the housing market and economy as the UK emerges from lockdown. Commentators believe it is pitching for a competitive, high-quality, low-LTV clientele that lenders like to have on their books to lower the overall risk of their lending proposition. Most lenders are returning to the 95% mortgage market with rates of around 4%, but competition will likely drive this down. This in turn will lead to lower rates on lower LTV products. This is because if there is little difference between the rate on a 90% and 95% mortgage, for example, borrowers will simply plump for the higher LTV offer to get a bigger deposit. But all eyes will be on whether lenders start bringing back rates below 1% on fixed-rate mortgages. The best fixed rate is being offered by Platform – at 1.06% for borrowers with at least a 40% deposit. Mortgage availability has improved in the first three months of the year but is expected to rise further thanks to a reduction in mortgage rates, an increase in high LTV mortgages and an easing of credit criteria. There are now 110 deals that offer 95% mortgages available to borrowers, including 38 under the government guarantee scheme. In January 2020, there were 313 first-time buyer mortgages available for those with a 5% deposit, but by June, these had all been pulled amid economic uncertainty. Now, the cheapest 95% five-year fix is at 3.45 per cent with Barclays Springboard. Among the deals that are part of the government guarantee, Halifax is offering the lowest rate with a two-year fix at 3.73%, although it comes with a £999 fee. NatWest is offering 3.9% with no fee. Although there have been a few products that have been briefly available during the pandemic, this is the first time we have seen mainstream lenders in the high LTV market in nearly a year. The new government backed mortgages are very competitive if you want a two-year fixed deal.

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