The choice of mortgages for borrowers with small deposits has risen to a 17-year high, according to the latest data from Moneyfacts.
It would appear lenders have been creating more deals for those with 5% or 10% deposits, which are most likely to be first-time buyers.
Moneyfacts revealed the combination in availability of deals for both 95% loan-to-value (LTV) and 90% LTV tiers rose to 1,360 options, which is the highest point since March 2008.
These deals combined, it said, made up 19% of the residential mortgage market overall.
There are now 896 deals at 90% LTV – which is where the borrower has a 10% deposit so therefore needs to borrow 90% of the property’s value.
Meanwhile, in the 95% LTV market, for those with a smaller 5% deposit, there are now 464 deals.
But whilst it might seem like good news for first-time buyers or movers with small amounts of equity, there is a note of caution attached as prices for these deals are not falling as fast as other products.
Rachel Springall, finance expert at Moneyfacts, said: “The government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive.
“However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins.
“Indeed, the average 95% and 90% LTV five-year fixed rates fell by just 0.02% and 0.01% month-on-month.”
She added: “First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living. However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder.
“Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”
In the past few months there have been several signs of innovation for first-time buyers searching for new ways to get onto the property ladder.
With some of the building societies such as Skipton, Ecology and Suffolk announcing deals to help first-time buyers get onto the property ladder and other lenders allowing higher borrowing, things are certainly looking up.
Andrew Montlake, CEO at London-based Coreco, told the Newspage agency this was good news.
“Lenders have come to the party in recent months, engaging with brokers and consumers to develop products that help to boost lending, especially in the all-important first-time buyer market,” he said.
“With the government rallying regulators to get the UK economy firing, this does appear to be having the intended effect, at least on the mortgage market. Product numbers are at their highest level since before the Global Financial Crisis.
“We are highly unlikely to get a repeat of that this time round as lenders these days have a different mindset and will not allow a repeat of 2008. Though the rise in product choice is encouraging, what’s less encouraging is that rates have started to rise again, albeit only slightly.”
