It's now easier to get a mortgage!

The size of deposit needed to get a mortgage is at its lowest since 2008 - and what's more, lenders are cutting interest rates left, right and centre. But is it really getting easier to borrow?

You rarely hear a good word spoken about the mortgage market nowadays.

That’s why I’m going to be bold, put my head above the parapet and declare that I don’t believe it’s all that bad. Well, it isn’t when you look at the current mortgage situation on paper anyway.

Here’s why...

High LTVs

The average amount of money you can borrow when compared to the value of your home has been consistently heading skywards at a rapid pace for the last year or so. In fact, the average loan-to-value (LTV) now stands at 60.8% - it’s highest since April 2008.

If you don’t believe me, just take a look at this table showing the change in the number of products offering higher LTVs since April last year:

Source: Moneyfacts.co.uk

Even Northern Rock is now offering competitively priced high value mortgages. You can pick up a 90% purchase LTV deal from the Rock at 5.65% fixed for two years, 6.49% for three years or 6.59% for five years – all with no fees whatsoever!

Yes, I know there are those out there that object to high LTV mortgages and perhaps think that the wounds of the recession are still a little too sore for 90 and 95% deals to start reappearing. But, as a 23 year old renter who – due to high living costs and pitiful savings rates – struggles to even imagine owning a home anytime soon, I welcome them.

The property market needs a little high LTV shock-therapy to jolt it out of the slumber it’s currently drifting through. But like all things, this has to be done in moderation - no one wants a return to the ludicrous lending practices of the mid-noughties after all.

After the royal cock-up that was the property bubble, I really don’t think that even the greediest of banks would let themselves get too profligate with mortgage lending. After all, the ghosts of Northern Rock and Bradford and Bingley must still haunt the corridors of most mortgage lenders.

Interest rates

And what’s more, as LTVs are climbing skywards, the interest rates offered by several providers are taking a nosedive. Skipton Building Society has chopped half a percentage point off rates for its two, three and five-year fixed rate mortgages as well as off some of its tracker deals. Barclays followed suit by cutting rates on its Woolwich tracker and fixed rate deals while Halifax and Northern Rock also dropped rates on their fixed and buy-to-let products.

And as I reported last month, HSBC has thrown its hat in the ring by axing fees for all of its tracker mortgages as well as allowing customers to switch to a fixed rate deal for no additional charge.

But why has there been this sudden rush to drop rates?

Well, the answer to this is something of a perfect storm resulting from a combination of the seasonal Spring ‘home-buying season’ and last month’s drop in inflation.

On one level, any cut in mortgage rates around this time of year was bound to set off a raft of price tumbles as lenders attempted to keep at the top of the market.

But it just happens that these rate drops were made even more viable by last month’s fall in inflation and the resulting ease in pressure on the Bank of England to up the base rate. It’s all to do with the swap rates – or the interest the lender has to shell out on the money markets to finance your mortgage. If the market expects the base rate to rise, then swap rates will increase and you’ll pay more for your mortgage.

No prizes for guessing what happened to swap rates in the week after the inflation figures were released and before these price cuts were introduced.

Eye of the storm

Unfortunately, if the recent price cuts are – as I believe – the result of a perfect storm, I have a sneaking suspicion that we may be sat in its eye – enjoying the calm before the battering winds set in.

You have to be very optimistic to believe that the base rate won’t be increased this year. It may not go up by May, but it will go up.

And that’s why – despite my positivity about the current mortgage market – I was keen to emphasise my ‘on paper’ caveat earlier in the article. After all, a look at mortgage approval figures still reveals a stagnant market where even if mortgage affordability is high, availability is not.

But just in case you are in a position to cash in on a perfect storm mortgage anytime soon, here are 20 of the top fixed rate and variable deals around at the moment.

10 great fixed rate deals

10 top variable deals

More: Avoid these expensive mortgages | Four ways to fix the housing market | Ten steps to finding a mortgage