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Seek out the best deals for a 90% mortgage

The recent panic in the mortgage market made lenders far more cautious about offering mortgages to customers with small deposits. Interest rates can still be off-putting, but there are signs that a 90% mortgage can be getting easier to obtain.

Among the big high street lenders, the Post Office (www2.postoffice.co.uk) offers a 90% mortgage on a 4.39% tracker basis, for 2 years. With the present low Bank of England rate, this amounts to a 4.89% rate. The maximum they will lend is £500,000.

NatWest (www.natwest.co.uk) has the same interest rate on their 2 year tracker. A loan of £200,000 over a 25 year period on a capital and interest repayment plan would cost £1,156 for your monthly payments. Note that this mortgage has an arrangement fee of £999.

Santander (www.santander.co.uk) has a 2-year tracker mortgage with an interest rate of 4.99%. The maximum sum available for this mortgage is £300,000.

Taking out a tracker mortgage relies on a certain degree of confidence that interest rates are not going to rise in the next 2 years, or at least not in any significant way.

Fixed rate deals offer peace of mind, but the interest rates on 90% mortgages are a little steeper. NatWest and the Post Office offer rates of 5.39%, which means that a loan of £200,000 over a 25 year period on a capital and interest repayment plan would cost £1,215 monthly. The NatWest mortgage offers no arrangement fees for first-time buyers.

Check the financial press and online mortgage sites for news of the latest 90% mortgage deals, as new products are being introduced very rapidly in the present volatile economic climate. Smaller lenders often have very attractive rates, although these may be for branch-only mortgages.

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