New research has revealed that homeowners with a 5% deposit are paying on average £324 more each month than those with a 25% deposit.
Typically it is first-time buyers with small deposits who are facing monthly mortgage payments close to 70% more than those who are able to put down 25% of their property’s value.
According to AmTrust, homeowners with a 5% deposit pay an average of £790 in monthly repayments, £324 more than the £466 paid each month by those with 75% loan-to-value (LTV) mortgages.
According to the Bank of England, average interest rates for those with a 25% deposit have decreased sharply over the past 12 months.
In March 2016, the average 75% LTV mortgage product was priced at 1.9% – in March 2017 this had dropped to 1.37%.
This fall in average mortgage rates has not been sustained for those with 95% LTV mortgages. Bank of England figures show that the average rate for those with 5% deposit has increased over the past 12 months, up from 3.92% in March 2016 to 4% in March 2017.
AmTrust believes the continued lender focus on customers with larger deposits, coupled with the closure of the Help to Buy Mortgage guarantee scheme and a number of lenders choosing not to offer 5% deposit loans in 2017, means a lack of product option for those potential homeowners in this bracket.
Simon Crone, commercial director, AmTrust International, mortgage and special risks, said: “As 2017 has progressed the mortgage price war which appears to be raging has not taken in those seeking high LTV mortgage products. If anything, the differential between rates has grown and as those with 25% deposits benefit from significant lender competition, those who are reliant on access to 5%-deposit loans have seen the cost of their monthly mortgage payment rise.
“The end of Help to Buy mortgage guarantee scheme marked something of a watershed with a number of scheme members continuing to offer loans at 90% but not proceeding with their 95% LTV products. While a number of lenders are utilising private mortgage insurance in order to keep their risk down and maintain their commitment to first-time buyers, we are clearly seeing the start of a new environment for high LTV mortgages. Especially when you consider real access to 95% LTV loans, compared to what might seemingly be available.
“The number of total 95% mortgages available is purported to be in the hundreds however, as our research shows, if you are seeking a property valued at the average obtained by first-time buyers in the UK and you only have a 5% deposit to put down, then there are slim pickings to choose from.”
Average monthly repayments: 75% LTV mortgages and 95% LTV mortgages
| 75% LTV mortgage | 95% LTV mortgage | Difference 75-95 | |
| Deposit | £39,409 | £7,882 | £31,527 |
| Loan | £118,228 | £149,679 | |
| Interest rate (average) | 1.37 | 4.00 | 2.63% |
| Monthly fixed payment (two years) | £466 | £790 | 69.5% |
| Annual payment | £5,592 | £9,480 | 69.5% |
Source: AmTrust International, Mortgage and Special Risks, Money Saving Expert, CML, Bank of England
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