Derin Clark

Derin Clark

Online Reporter
Published: 09/09/2019

With the total number of 95% loan-to-value (LTV) mortgage deals falling, while those on a 90% LTV are on the rise, first-time buyers may want to wait until they can save for a 10% deposit to take advantage of the better rates.

Research from Moneyfacts UK Mortgage Trends Treasury Report reveals that the total number of products at a maximum 95% LTV have fallen by 11, from 391 deals in August 2019 to 380 this month, while the number at a maximum 90% LTV has increased by 12, from 762 products in August 2019 to 774 now.

In addition to this, the report also found that despite the five-year SWAP rate dipping below the two-year SWAP rate at the beginning of August, on a 95% LTV mortgage, the average five-year fixed rate has increased by 0.01% to 3.64% between August and September. The average rate on a 90% LTV has, in comparison, fallen by 0.05% from 3.00% to 2.95% during this same period.

This trend can be seen throughout the mortgage charts, with deals at a lower LTV tier rising and average five-year rates falling.

Residential mortgage product analysis 

LTV availability - Total products 

Max LTV 60% 75% 80% 85% 90% 95%
Aug 19 572 862 638 679 762 391
Sep 19 580 881 663 680 774 380
Difference 8 19 25 1 12 -11

Average five-year fixed rate - by LTV

Max LTV 60% 75% 80% 85% 90% 95%
Aug 19 2.23% 2.68% 2.87% 2.87% 3.00% 3.63%
Sep 19 2.18% 2.65% 2.77% 2.80% 2.95% 3.64%
Difference -0.05% -0.03% -0.10% -0.07% -0.05% 0.01%

 

Why a reduction in 95% LTV competition?

Back in May, the head of the Prudential Regulation Authority (PRA) warned mortgage lenders that they were being watched ‘like a hawk’ in regards to offering riskier mortgage deals. This could have resulted in providers shying away from lending to the riskier 95% LTV market and instead focusing on offering more competitive rates for the lower LTV tiers that are seen as a less risky option for lenders.

Commenting of the reduction in 95% LTV competition, Darren Cook, finance expert at Moneyfacts.co.uk, said: “It is clear that most lenders are staying away from competing at the 95% LTV tier, with many now focusing their attention on mortgage business at LTV tiers of 90% and below. As lenders perhaps opt to pass on the benefits of lower interest rate SWAPs onto the lower LTV tiers, up to and including mortgages that require a 10% deposit, this is not good news for those borrowers who can only muster up a 5% deposit.

“In fact, the gap between the average rate at the 95% and 90% LTV tiers for a five-year fixed deal is widening, with the difference between the two averages standing at 0.69% for September, up from 0.64% at the start of June, following the PRA warning. This could mean that those borrowers with a smaller 5% deposit may benefit from waiting to save until they accumulate a 10% deposit in order to secure a more favourable rate and have a greater choice of products – with double the number of mortgages on offer at the 90% LTV compared to the 95% LTV tier.”

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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