First-time buyer deals almost double month-on-month

First-time buyers with a 10% deposit now have more choice as the number of 90% loan-to-value (LTV) deals has increased month-on-month, research carried out by Moneyfacts reveals.

The data, which is due to be published in the Moneyfacts UK Mortgage Trends Treasury Report, found that the number of mortgage deals at a 90% LTV (which requires a 10% deposit) has increased from 88 on 1 December 2020 to 160 on 1 January 2021. In addition to this, the average rates on both two and five year fixed rate deals at a 90% LTV have fallen month-on-month. The average two year fixed rate at 90% LTV has fallen by 0.14%, down from 3.79% on 1 December 2020 to 3.65% 1 January 2021, and the average five year fixed rate at 90% LTV has fallen by 0.13%, from 3.92% to 3.79% month-on-month during the same time period.

While this is good news for many first-time buyers, as the below chart shows, the number of deals available to those with a 10% deposit is still significantly lower than those available at the beginning of March, before the pandemic began impacting the UK economy. As well as this, the average two year fixed deal rate at a 90% LTV is 1.08% higher on the 1 January compared to the 1 March 2020. Meanwhile, the average five year fixed deal rate at a 90% LTV is 0.88% higher.

Homeowners looking to take advantage of the stamp duty holiday and move home with a 25% deposit, will have been disappointed to see that the average two year fixed rate at 75% LTV increased slightly month-on-month, increasing from 2.26% on 1 December 2020 to 2.27% on 1 January 2021. Saying this, the average two year fixed rate at 75% LTV remains lower than the average rate on the 1 March 2020, when it stood at 2.29%. Those looking to lock into a longer five year fixed term deal at 75% LTV will have had a better month as average rates fell by 0.03%, from 2.41% to 2.38% month-on-month, and on the 1 January 2021 was 0.18% lower compared to the 1 March 2020 when it stood at 2.56%.

In addition to this, as the below chart shows, the number of deals available at a 75% LTV has risen between 1 December 2020 and 1 January 2021, up from 621 to 629, but there are still 216 fewer deals available compared to the 1 March 2020, when there were 845 75% LTV deals available.

Commenting on the research, Eleanor Williams, finance expert at Moneyfactscompare.co.uk, said: “This improvement in options for mortgage borrowers has occurred at a time when high levels of borrower demand have been fuelled by those hoping to benefit from the stamp duty holiday and by those who re-evaluated what they want from a home and were part of the unleashed demand that arose after the first lockdown in 2020. As we navigate our way through another period of restrictions, this time the property market is expected to remain open for business. However, with timescales for processing mortgages potentially subject to delays, and with the average shelf life for mortgages remaining at just 28 days, it has possibly never been more vital to call upon the knowledge and help of a qualified mortgage broker to progress any applications and explore what may be the best option for their circumstances.”