Despite a brief ‘bounceback’ in early June mortgage lenders are continuing to pull the plug on their high LTV mortgages for borrowers with small deposits.
According to analysis released on Monday by Moneyfacts.co.uk there were only 14 mortgages available for borrowers with a 5% deposit.
These 95% loan-to-value mortgages – which provide a loan of 95% of the property’s value – are mainly aimed at first-time buyers. In January there were 386 available, but with lenders gradually pulling products because of the impact of Covid-19, numbers have fallen dramatically.
Even those with slightly larger deposits are seeing their options diminish. The 90% LTV market for borrowers with 10% deposits has also shrunk rapidly.
Back in January buyers who needed loans of this size would have had the pick of, potentially, 751 products. On Monday, they had only 72 from which to choose, despite some lenders re-introducing products earlier in June.
It’s a fast-moving market – indeed, just after Moneyfacts released the statistics Ipswich Building Society pulled its 90% LTV mortgage following ‘overwhelming demand’.
It said it needed time to process the applications it had already put in place and clear its backlog before re-offering the high LTV deal again.
Eleanor Williams, financial expert at Moneyfacts, explained the higher LTV mortgage market had been significantly impacted by the Coronavirus pandemic.
“This could be due to a combination of factors,” she explained, “such as lenders experiencing understandable operational difficulties, high levels of pent-up borrower demand unleashing as the property market re-opened, and there is also concern around the possibility of negative equity, as there is worry that potentially property prices may drop in the months to come.”
Will the high LTV mortgages return?
The higher loan-to-value products are commonly favoured by first-time buyers, who are key to keeping the housing market running.
As such, Williams said there was hope lenders would return these products to their ranges soon. “The more providers who are able to do so will not only ensure greater choice is available to consumers but would hopefully also balance the level of demand,” she added.
In the meantime, anyone struggling to find suitable mortgage options is urged to speak to a mortgage broker or intermediary who has access to as much of the market as possible.
Greg Cunnington, director of lender relationships and homes at Alexander Hall, advised borrowers who were fortunate enough to have financial support from family members to consider one of the ‘family assist’ mortgages on the market.
Barclays Springboard mortgage is one such example as is Tipton & Coseley Building Society’s 100% loan‐ to‐value Family Assist product for first-time buyers. There are other options available too, which a broker can help you to identify.
Williams added: “Any borrowers who are looking to explore their purchase or remortgage options at the moment, particularly if they have a low level of deposit or equity, would do well to seek independent financial advice to go through their options, as what products are available, and also the criteria and different requirements of providers continues to update with regularity.”
Moneyfacts has compiled the following table to help you see a little more clearly how many products are available in each loan tier. These figures were published on Monday 29 June, so may have changed slightly since.
| Residential mortgage market analysis | |||||||
| Jan-20 | Feb-20 | Mar-20 | Apr-20 | May-20 | Jun-20 | 26-Jun-20 | |
| Total product count (all LTVs, fixed and variable rate products) | 4,969 | 5,076 | 5,222 | 3,192 | 2,566 | 2,810 | 2,748 |
| Product count at 90% LTV (fixed and variable rate products) | 751 | 776 | 779 | 326 | 100 | 183 | 72 |
| Product count at 95% LTV (fixed and variable products) | 386 | 405 | 391 | 162 | 41 | 31 | 14 |
| Average Standard Variable Rate (SVR) | 4.90% | 4.90% | 4.90% | 4.75% | 4.55% | 4.49% | 4.48% |
| Average rate two-year fixed – all LTVs | 2.44% | 2.42% | 2.43% | 2.36% | 2.09% | 2.02% | 1.98% |
| Average rate five-year fixed – all LTVs | 2.74% | 2.73% | 2.74% | 2.66% | 2.35% | 2.26% | 2.23% |
| Data shown is as at first working day of month, unless otherwise stated. Source: Moneyfacts.co.uk | |||||||
[box style=”4″]
What Mortgage has teamed up with L&C to offer you expert advice on the right mortgage deal.
Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
[/box]
Great post.
First time buyers in Scotland can get round this by using the Scottish Home Buyers scheme
Contact us at http://www.themortgageadviceservice.co.uk for further information
Proportunity is an alternative for people looking to complete with 5% deposits at the moment. Works similar to help to buy, but you can use it on any home (not just new builds).