The mortgage market has shown signs of recovery as the number of 90 per cent loan to value (LTV) products reached a six-month high and overall choice improved.

According to a Moneyfacts report, the number of low deposit mortgages almost doubled from 72 to 160.

However, those who require a 90 per cent LTV mortgage still have fewer options than those with more money to put down. Borrowers who qualify for an 85 per cent LTV mortgage have 439 products to choose from and 75 per cent LTV borrowers have 629.

In total, there are currently 2,893 residential mortgages on the market, the most recorded since April 2020 when there were 3,192 mortgages available. This is up slightly from the 2,782 on the market last month.

Rates on the up

The average rate for a two-year fixed mortgage across all LTVs rose for the sixth month in a row by 0.03 per cent to 2.52 per cent, the highest average rate since January 2019.

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The average two-year fixed rate is also 0.08 per cent higher year-on-year and a 0.53 per cent rise on the record low seen in July. The record low rate coincided with a period when there were just 70 high LTV products on the market, where higher rates are typically seen.

The average rate for a five-year fixed across all tiers also increased in January from 2.69 per cent to 2.71 per cent. However, this was lower than the average rate of 2.74 per cent during the same month last year.

As well as returning to the market to serve borrowers with a smaller deposit, lenders also appear to be treating those in need of a 90 per cent LTV more favourably by reducing borrowing costs.

The average rate for a two-year fixed mortgage at this tier dropped from 3.79 per cent to 3.65 per cent over the month while a five-year fix fell from 3.92 per cent to 3.79 per cent.

Eleanor Williams, spokesperson at Moneyfacts, said: “Following the sharp drop off in availability in 2020, it is positive to see that we are beginning 2021 with the total number of mortgage deals rising for the third consecutive month.

“Not only is the increase in product choice a positive for borrowers, but it seems that a measure of competition may have started to return to some sectors as well.”

She added: “This improvement in options for mortgage borrowers has occurred at a time when high levels of borrower demand have been fuelled by those hoping to benefit from the stamp duty holiday and by those who re-evaluated what they want from a home and were part of the unleashed demand that arose after the first lockdown in 2020.”