Mortgage war cuts bills by £1,500

BORROWERS with small deposits can save up to £1,500 a year by taking advantage of a new mortgage price war.

Rates have tumbled for homebuyers who can only put down a deposit worth 5pc to 10pc of the value of the property.

This is the most that many first-time buyers can afford.

Two years ago, the best two-year deal for someone with a 5pc deposit was 4.75pc, offered by Market Harborough Building Society. On a £150,000 loan, the repayments would have been £855 a month.

Today, the cheapest two-year rate is 3.29pc, offered by Nottingham Building Society. The monthly repayments would be £734 — £121 cheaper. That means a saving of £1,452 a year. Nottingham’s deal has a £999 fee.

The cheapest five-year rate for someone with a 5pc deposit is 3.79pc, offered by Hanley Economic Building Society. The best deal two years ago was 4.99 pc.

Until recently, almost all lenders had been focused on luring in customers with large deposits.

But now experts say they’ve switched their attention to borrowers with small deposits, which has pushed down rates. David Hollingworth, of mortgage broker London & Country, says: ‘It’s great news for first-time buyers, who may find it easier to get on the ladder.’

Customers with a 10 pc deposit can get a two-year loan at 1.99 pc from HSBC. Repayments will be £906 a year cheaper than the top 2.99pc rate in 2014, on offer from Leek United Building Society. There is a £1,499 fee.

Norwich & Peterborough has the cheapest five-year deal at 2.93pc. It has a £1,295 fee. This works out at £1,120 cheaper a year than Clydesdale Bank’s 4.09pc table-topping rate two years ago.