The number of higher loan-to-value (LTV) mortgages, including 90% and 95% LTV, reached its highest level in 17 years, according to Moneyfacts data.
These products made up 19% of the residential mortgage market.
Product choice for residential mortgages overall hit 7,062, the highest since October 2007.
The number of 95% LTV deals rose to 464, also the highest since March 2008, while 90% LTV options reached 896.
Average 2- and 5-year fixed mortgage rates dropped to 4.96% and 5.00% respectively, with the average 2-year rate falling by 0.60% since September 2024.
The average 5-year rate is now 0.20% lower than a year ago.
The Moneyfacts average mortgage rate fell to 5.00%, its lowest since September 2022, down from 5.44% in September 2024 and 6.41% in September 2023.
The average 2-year tracker variable rate dropped to 4.66%.
Meanwhile, the average standard variable rate fell to 7.32%, down from a high of 8.19% in late 2023.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers with a limited deposit or equity of just 5% or 10% will find the choice of higher loan-to-value (LTV) deals has risen to its highest point in 17 years.
“However, it is worth noting these deals represent just 19% of the market overall, up slightly from 17% a year ago, while product choice as a whole for residential mortgages has expanded to its highest count since October 2007.
“The Government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive.”
Springall added: “However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins.
“Indeed, the average 95% and 90% LTV five-year fixed rates fell by just 0.02% and 0.01% month-on-month.
“The margin of falls to the overall average fixed mortgage rates shrunk month-on-month, no doubt due to the unsteadiness of swap rates, with only 0.01% shaven off the average five-year fixed mortgage rate, and just 0.05% off the two-year equivalent (compared to 0.07% and 0.08% respectively a month prior).”
She said: “Longer-term fixed rates are not seeing significant shifts, as over the past 12 months, the average two-year fixed rate has dropped by three times as much as its five-year counterpart (0.60% versus 0.20%).
“Overall, the drop of just 0.04% to the Moneyfacts Average Mortgage Rate during August does not bode well for borrowers who were hoping for a rate war, but it is worth pointing out that economic unrest typically leads to rising swap rates, which forewarn lenders.
“As we have seen countless times, lenders can adopt a more cautious approach to pricing their mortgages when swap rates rise, leading to small margins of moves, but deals can still be reviewed.”
She added: “During August, the average shelf-life of a deal was unchanged month-on-month at 17 days, so the churn of products did not calm. Therefore, borrowers will not want to miss out on securing a new deal, such as those remortgaging.
“In fact, those looking to stay with the same lender could secure a new deal four months before their current initial rate ends.
“This window has been shortened from six months by a handful of lenders since last year, as rate volatility calmed, so it could change if rates were to rise dramatically.”
She said: “First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living.
“However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder.
“Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”
Mary-Lou Press, president of NAEA Propertymark, said: “While it’s positive that property transactions remain buoyant and many buyers, especially those entering the market for the first time with lower deposits, are able to access mortgages to get them onto the property ladder, it’s evident that affordability and raised house prices are a continuous battle.
“Now that Stamp Duty has risen across England and Northern Ireland, this is likely making it even more difficult to access better mortgage products due to further financial constraints.
“It also has the potential to distort the housing market, often stopping people from moving when they want to.”
