In the past month, first-time buyers with a 10% deposit or less will have seen the number of mortgage deals available to them fall by more than half.
Data set to be published in the latest Moneyfacts UK Mortgage Trends Treasury Report shows that between 1 June and 1 July 2020, the number of deals available at 90% loan-to-value (LTV) has fallen by 113, from 183 to 70. Meanwhile, the number of deals available at 95% LTV has fallen by 17, from 31 to 14, during this same time period.
“After a minor rally last month, July saw overall product choice fall again, starting the month with 2,728 products on offer,” explained Eleanor Williams, finance expert at Moneyfacts.co.uk.
“March began with 779 products available at 90% LTV, which had dropped by 91% to 70 products on offer at the start of July – a record low based on our Treasury report data, beating the previous low of 71 products in May 2009.”
For first-time buyers or those looking for a high LTV mortgage and who want to lock into a fixed rate deal, the market looks even worse, with the number of two year fixed rate deals at 90% LTV falling from 55 to just 16 between June and July. The number of two year fixed rate products at 95% LTV has fallen from six available in June to just one available in July. Borrowers looking to lock into a five year fixed rate deal at 90% LTV will have seen their choices decrease from 51 deals available in June to 26 in July, while at 95% LTV it fell from nine to just five.
|90% and 95% LTV mortgage analysis|
|March 2020||June 2020||July 2020|
|Product count 90% LTV (fixed and variable rate products)||779||183||70|
|Product count 95% LTV (fixed and variable rate products)||391||31||14|
|Product count two year fixed rate at 90% LTV||294||55||16|
|Product count two year fixed rate at 95% LTV||137||6||1|
|Product count five year fixed rate at 90% LTV||269||51||26|
|Product count five year fixed rate at 95% LTV||142||9||5|
Along with product choice falling, the majority of average rates at 90% and 95% on two and five year fixed rate deals have increased in the last month. The average rate at 90% LTV on a two year fixed rate deal has increased from 2.30% in June to 2.90% in July, while the average two year fixed rate at 95% LTV has increased from 3.28% to 3.94%. Meanwhile, the average five year fixed rate at 90% LTV has increased from 2.57% to 3.16%, but the average five year rate at 95% LTV has fallen slightly from 3.48% to 3.46%.
|90% and 95% LTV average rates|
|March 2020||June 2020||July 2020|
|Two year fixed rate 90% LTV – average rates||2.57%||2.30%||2.90%|
|Two year fixed rate 95% LTV – average rates||3.26%||3.28%||3.94%|
|Five year fixed rate 90% LTV – average rates||2.91%||2.57%||3.16%|
|Five year fixed rate 95% LTV – average rates||3.58%||3.48%||3.46%|
While the fall in competition in the high LTV market will be disappointing for first-time buyers keen to get onto the property ladder, there is optimism that the market could improve. As Williams explained: “It bears noting that lenders have been launching products in the high LTV sectors, particularly at 90%, and over the course of a month the numbers of available deals can fluctuate enormously. It seems that while lenders have the appetite to lend, intense customer demand being levelled at the small number of providers who have relaunched in these tiers is overwhelming, at a time when operational capacity is already stretched and there continues to be existing customers requiring support with payment difficulties in addition to new business underwriting. Therefore, until more lenders return to this space with products to support the clear borrower demand, it seems likely that we will continue to see an ebb and flow in availability.”
First-time buyers looking to get onto the property ladder at the moment will find it challenging to get a competitive mortgage deal. For many, speaking to a mortgage broker may be the best chance of securing the most competitive deal available, as brokers often have to the resources needed to apply for the best deals. First-time buyers could also consider a guarantor mortgage, which normally allows borrowers to borrow at a higher LTV (sometimes at 100% LTV), but uses a third party – normally a close relative – as a guarantor in case repayments are not met.
Alternatively, first-time buyers could continue to save for a higher deposit that would enable them to access a higher LTV deal. To help with saving for a deposit, first-time buyers should consider taking advantage of the Government’s 25% bonus, which is available on Lifetime ISAs as long as the money is kept in the ISA for at least 12 months and is used for specific reasons including buying a first home.
Other options, such as a Help to Buy loan or a shared ownership mortgage could also be considered by first-time buyers looking to get onto the housing ladder.
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