Since the introduction of the Help to Buy Mortgage Guarantee Scheme (otherwise known as H2B) in October 2013, the market for high loan-to-value mortgages has been well and truly shaken up. Indeed, our latest research shows that not only has the number of such mortgages increased considerably, but average rates have notably dropped, which means first-time buyers could be enjoying one of the best borrowing environments they've ever seen.
The data shows that the number of 95% loan-to-value (LTV) mortgages has more than quadrupled from just 56 products in October 2013 to 271 today, while the average rate for a two-year fixed 95% LTV mortgage has fallen by a significant 1.59% over the same period. The table below highlights the changes in more detail, and as you can see, H2B has had a definite impact:
However, the scheme that has driven the high-LTV revival won't be with us for much longer, as Charlotte Nelson, finance expert at Moneyfacts, comments:
"In six months' time, phase two of the Help to Buy initiative will terminate, marking the end of a successful Government drive to boost mortgage lending at higher LTVs," she said. "First-time buyers everywhere, regardless of whether they took advantage of the scheme or not, have a lot to thank it for – essentially, it acted as a catalyst for lending at 95% LTV and helped to bring a measure of normalcy back to the market."
The number of products available at 95% LTV has indeed soared, and before the initiative was announced, borrowers with a deposit of just 5% would have struggled to find a mortgage. These deals were few and far between, and many of the products on offer were only available to local areas or required a parent or guardian to guarantee the loan – and even if a borrower managed to find a suitable offer, the cost of the mortgage repayments was high.
Happily, the cost of such a mortgage today is substantially cheaper, as the table above shows. But just because Help to Buy mortgages have been the driver of change, it doesn't mean that these are the only deals to consider, as Charlotte explains:
"With the initiative set to end soon, borrowers who are contemplating a Help to Buy mortgage should perhaps cast their net wider and search the whole of the market – lenders outside of the scheme are now actively competing in this key area, so there could be better deals found elsewhere. For instance, the best five-year fixed rate mortgage at 95% LTV from the Help to Buy scheme is priced at 4.48% today, but the best rate available overall stands at 3.79%.
"First-time buyers are often considered to be the lifeblood of a healthy mortgage market, so it's possible that the removal of such an important and pivotal scheme will slow progress for these borrowers. Only time will tell what impact the end of the scheme may have, but for now small deposit-holders are in one of the best positions since the financial crisis, so they should take advantage of the deals available now to avoid disappointment in the future."
If you're thinking of taking that first step on the ladder, don't delay! Now's a great time to see what kind of mortgages are available, and if you compare both Help to Buy mortgages and alternative deals aimed at first-time buyers, you can find the ideal mortgage to help keep your repayments in check.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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