More mortgages available but they're harder to get

There are three times the number of loans available to borrowers with a 20% deposit than there were two years ago and more than double the number available to households with a 10% down payment.

Yet lenders have become more strict when considering whether you can afford a home loan.

To get a mortgage you also need a decent credit history to prove to the bank or building society you are likely to repay that debt. The less of a deposit you have the better the credit score you require.

New mortgage lending fell to a record low in 2010 and advances are expected to drop further during the coming year, according to the Bank of England; showing the tough conditions borrowers face.

Even if you get a mortgage with a smaller deposit you will pay a significant premium for the privilege which can cost thousands of pounds a year more.

More small deposit deals available

Figures from data provider Moneyfacts show that between February 2009 and now there has been:

• a 128% rise in the number of mortgages that require a minimum 10% deposit from 94 to 214;

• a 252% rise in 15% deposit mortgages from 159 to 560;

• a 302% rise in 20% mortgages from 97 to 390;

• a 102% rise in 25% deals from 422 to 851, and;

• a 28% fall in 40% mortgages from 261 to 187

There are 2,447 mortgages available today compared to to 1,097 two years ago.

Michelle Slade, from Moneyfacts, says: "Although lenders' windows may be full of best buy deals, it doesn't mean they are wanting to lend.

"The increase in the number of mortgage deals for those with smaller deposits is encouraging, but only a limited number of such mortgages are likely to be approved.

"Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they accept."

Even if you qualify for a deal you will pay more if you have a smaller deposit.

Moneyfacts says the top two-year fix for those with a 40% deposit is 2.65% with a £1,995 fee from Santander, which costs £18,411 over the term on a typical £150,000 repayment mortgage, assuming the fee is paid upfront.

In contrast, the top 90% deposit two-year fix, from Newcastle Building Society, is 5.15% with an £894 fee, which costs £22,254 over the term.

How can I boost my chances of acceptance?

The key is having the necessary income, necessary deposit and a good credit history.

While the first two variables are out of some people's control, you can boost your credit history.

This involves paying all bills on time and not exceeding any of your credit limits.

Also, don't unnecessarily apply for any credit close to a mortgage application, make sure you're on the electoral roll and check your credit file for errors (see the Credit Rating guide).

Your ability to repay will be assessed on your disposable income after all expenditure so the more you spend, the less likely you are to get a mortgage.

Also consider some lenders won't lend on certain properties such as new build flats, ex-council homes or homes above a shop. A good broker can help you identify a lender likely to give you cash for your chosen property.

Further reading/Key links

Mortgage cost-cutting guides: The Remortgage Booklet, Free Mortgage Booklet, Cheap Mortgage Finding, Ditch My Fix? Get help: Mortgage Arrears, Redundancy Help