A question mark has been raised over the effectiveness of 95% mortgages after evidence emerged few buyers had signed up to the deals.
Just 1% of mortgage completions recorded in July 2021 were made using a 95% deal, according to data from online mortgage broker, Trussle.
It said the choice of deals for those with 5% deposits or equity was still relatively low and, despite a huge number of enquiries into the deals, most borrowers were being rejected for these mortgages.
95% deals became almost non-existent during the pandemic as lenders pulled them from the market leaving many people with small deposits unable to move forward with their purchasing plans.
In Spring this year, however, the government launched the Mortgage Guarantee Scheme to support lenders to offer 95% deals once again.
Only a handful of lenders offered deals through the government scheme, but many other providers –buoyed by confidence from the government initiative – released their own 95% deals creating a new range of options for first-time buyers and those with small amounts of equity.
Yet despite the flurry of lenders offering deals, few home sales being made via Trussle were made using 95% mortgages.
There were two reasons for this, the broker explained. While the amount of lenders offering 95% deals had increased, the number of mortgages was still below 2019 levels. Indeed, there were 372 such deals in July but this is nowhere near the November 2019 peak of 949.
What’s more, while enquiries to Trussle about 95% deals have been high – 26% of all new customers have asked about them – few have been successful in their application.
Restrictions
Trussle explained this was because high LTV mortgages were subject to stricter lending criteria, required higher credit scores and could not benefit from gifted deposits.
In addition, some property types like flats and new builds were ineligible for the deals. As a result, successful 95% mortgage applications accounted for just 1% of all Trussle completions in July 2021.
Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “The return of 95% mortgages earlier this year was greeted with much anticipation.
“With greater application scrutiny and soaring house prices, first-time buyers were facing a challenging market and these high LTV deals are crucial to ensuring home ownership remains an accessible dream for all.
“There is clearly an appetite for high LTV mortgages, as we have seen significant demand for 90% LTV deals, however, after making a real comeback in March it is disappointing that 95% deals are failing to make the difference we hoped to see.”
90% mortgages more popular
Trussle explained, while the 95% market had failed to take off, 90% LTV deals for those with 10% equity or deposits had been a popular choice, accounting for 10% of the broker’s completions in June 2021.
It revealed the places in the UK where these deals were in most demand.
| Location | Postcode | % of demand by leads | |
| 1 | Llandrindod Wells | LD | 50% |
| 2 | Sunderland | SR | 43% |
| 3 | Huddersfield | HD | 40% |
| 4 | Bradford | BD | 39% |
| 5 | Doncaster | DN | 39% |
| 6 | Dumfries and Galloway | DG | 38% |
| 7 | Oldham | OL | 37% |
| 8 | Darlington | DL | 37% |
| 9 | Motherwell | ML | 37% |
| 10 | Carlisle | CA | 37% |
(Source: Trussle)
