A few years ago, prior to the credit crisis, nobody gave much thought to LTV. The best buys were filled with deals at 90% and 95% LTV, so borrowers had their pick of competitive mortgage deals. However, as the crisis hit these deals were amongst the first to go. Tumbling house prices and additional funding costs meant that the risk of mortgages with smaller deposits were too great for lenders to take and the majority withdrew their 90% and 95% LTV mortgages from the market.
Today’s mortgage pricing is more linked to LTV, the more of a deposit you have the lower the mortgage rate you are likely to be offered. The best rates continue to be offered to those with at least a 25% deposit, but in the last year the mortgage market has opened up with one of the biggest growth areas being the availability of mortgages to those borrowers with just a 10% deposit.
Today all the major lenders in the market are offering mortgages at 90% LTV and the increased competition has served to drive rates lower, which is good news for borrowers and the wider economy. Latest figures from Moneyfacts show that the number of 90% LTV mortgages has seen more than a threefold increase to 253 since May 2009, while the average rate on a two year fixed mortgage at 90% LTV has fallen from 6.09% to 5.35% during the same period, despite no change in bank base rate.
First-time buyers are the life blood of the housing market and the requirement for a sizable deposit has become one of the major stumbling blocks stopping many of them getting onto the housing ladder. For the first time in more than three years, first-time buyers are starting to have real options. Those who already have a deposit have increased mortgage options, while those saving for a deposit now have access to a range of schemes specifically aimed at first-time buyers, such as Nationwide’s ‘Save to Buy’ scheme, which gives borrowers access to mortgages at 95% LTV once they have saved for at least six months.
The availability of a wide range of mortgage products suitable for different requirements is key to a healthy market. People are unique and cannot be shoe horned into a ‘one size fits all’ product. Clearly, we still encourage borrowers to save as much as they can and turn this into an appropriate deposit. However, it is helpful that we’re now seeing a wider range of mortgage deals return to the market, so that we, as lenders can find the best fit for our customers.
