Borrowers with 5% deposits are currently benefiting from a promising mixture of record low rates and more choice providing a glimmer of optimism for those dreaming of owning their own property.
This is according to Moneyfacts.co.uk which has been closely tracking mortgage prices and has noticed the average rates of 95% loan-to-value (LTV) mortgages have plummeted to the lowest level on its records.
What’s more, even those with a 10% deposit can currently take advantage of reductions which are lower than the equivalent rates on offer this time last year.
Eleanor Williams, finance expert at Moneyfacts, thinks lenders are deliberately dropping prices in this market to target first-time buyers.
She explained: “It may be that, following the end of the stamp duty holiday which had kept the property market buoyant for much of 2021, providers are now focusing on enticing first-time buyer business, which has often been considered the life blood of the housing market.”
She added: “Due to rising house prices, mortgage affordability concerns and until recently limited product choice and higher rates, taking that first step onto the property ladder may have felt a distant possibility for many, so these positive figures may provide some hope to those who dream of owning their own home.”
Overall, the total number of mortgages has risen in December by 159 to reach 5,315, which Eleanor explained was a level not reached since Moneyfacts recorded 6,192 products on offer in March 2008.
She said the number of mortgages available was now at a higher level than before onset of the pandemic in March 2020 (5,222). She said this demonstrated a robust level of recovery in the residential sector.
‘Hung out to dry’
But despite the fact rates and availability were good for first-time buyers, it would still appear there were many other hoops to jump through.
Indeed, new data from UK Finance – the body which represents banks – revealed the number of home movers had increased above the usual levels over the summer months, driven by the stamp duty holiday. It said movers ‘disproportionately’ benefited from tax exemption.
Nigel Purves, CEO of Wayhome, said: “The evidence speaks for itself – home movers disproportionately benefited from the government’s support through the pandemic, while would-be first-time buyers were hung out to dry.
“The first rung of the property ladder is getting further and further away – salaries have fallen behind inflation, meaning even those in full-time work face needing to save for more than fifteen years for a deposit.
“Once they’ve got that deposit, restrictive lending criteria means getting a mortgage is still no mean feat.”
“The current landscape is unsustainable; homeownership shouldn’t be an impossible dream – we need radical change in the property market to make it a reality for more people.”
| Mortgage market analysis (Source: Moneyfacts.co.uk) | ||||||
| Dec-19 | Mar-20 | Dec-20 | Nov-21 | Dec-21 | ||
| Fixed and variable rate products | Total product count – all LTVs | 4,966 | 5,222 | 2,782 | 5,156 | 5,315 |
| Product count – 95% LTV | 386 | 391 | 8 | 316 | 353 | |
| Product count – 90% LTV | 765 | 779 | 88 | 667 | 706 | |
| All LTVs | Average two-year fixed rate | 2.44% | 2.43% | 2.49% | 2.29% | 2.34% |
| Average five-year fixed rate | 2.74% | 2.74% | 2.69% | 2.59% | 2.64% | |
| 95% LTV | Average two-year fixed rate | 3.25% | 3.26% | 4.44% | 3.22% | 3.09% |
| Average five-year fixed rate | 3.57% | 3.58% | 3.97% | 3.51% | 3.39% | |
| 90% LTV | Average two-year fixed rate | 2.62% | 2.57% | 3.79% | 2.54% | 2.51% |
| Average five-year fixed rate | 2.94% | 2.91% | 3.92% | 3.02% | 2.95% | |
| Data shown is as at the first available day of the month, unless stated otherwise. Source: Moneyfacts Treasury Reports | ||||||
