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Borrowers with lower deposits are paying as much as £2,230 a year more for the same loan as those who can put down deposits of 40% for a mortgage

New analysis from mform.co.uk has found that a gap is widening between the mortgage ‘haves’ and ‘have nots’. Its research shows two-year tracker rates for borrowers with a 40% deposit can be as low as 3.99% while for two-year fixed rates they can be 4.49% for a £150,000 loan.

But if the borrower only has a 20% deposit rates rise to 5.99% for trackers and to 6.45% for fixed rates. If the borrower only has a 10% deposit then there are no trackers and the lowest rate for a fixed deal is 6.45%.

That translates into huge differences on the true cost of the deal including all fees. The average true cost of a two-year fixed deal at 60% LTV is £21,265 compared with £25,729 for a 90% deal – a difference of £2,232 a year.

For a two-year tracker the difference in true cost is £1,919 a year – the average cost at 60% LTV is £20,907 compared with £24,746 at 80% LTV.

The huge range in rates and the massive differences in true cost show the mortgage market is still a long way from returning to normal, mform.co.uk believes.

Francis Ghiloni, marketing and business development director at mform.co.uk, says: “The mortgage market is entirely back to normal as long as you have a deposit of 40% which is okay for some remortgagers - but of course that is a long way from normal and doesn’t help the housing market as by definition to move up to larger properties families need to stretch their borrowing.”

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.