"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."
Those who are only able to put 5% down on a property are continuing to pay "significantly more" for their mortgages - around 70% more than those who are able to put down 25%, and this figure is increasing.
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% LTV mortgages. This is a further increase in 2017 given that 95% LTV mortgage holders paid on average £294 more at the end of 2016; indeed, while the cost for 75% LTV mortgages has dropped from £468 to £466 per month, for 95% LTV loans the cost has increased from £762 per month.
According to the Bank of England, average interest rates for those with 25% deposit/equity 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/equity has increased over the past 12 months, up from 3.92% in March 2016 to 4% in March 2017.
The average rate for 95% LTV mortgages has been increasing throughout 2017 from its December 2016 low of 3.62%. The price differential between 75% and 95% LTV mortgages has increased since the last iteration of AmTrust’s LTV Tracker, rising from 2.24% at the end of 2016 to 2.63% in March 2017.
Additionally, AmTrust believes that true 95% LTV product availability lags way behind ‘official numbers’.
Its research revealed that, for those wanting to purchase a property at both the average first-time buyer price in the UK (£157,637) and the average UK house price (£219,775), with only a 5% deposit/equity, there was only one two-year product of any type available. Broadening this out to any term, the search revealed only six products in total were available.
The research also found that the more money borrowers are able to put down – even if it is only 5% of the property price – the more products become available. At a house price of £250,000, if the borrower can produce a £12,500 deposit, the mortgage market options open up with 62 products available on a two-year basis, and 155 products for all terms/all types.
Simon Crone, Commercial Director, AmTrust International, Mortgage and Special Risks, commented: “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 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.
“If you are looking for a two-year deal of any type then according to one of the most widely used mortgage best buy search engines, there is only one product that will meet your needs. While we acknowledge that mortgage advisers may be able to find specific products to meet specific circumstances and affordability, search engines are often the first port of call for first-timers and they are likely to be left particularly disappointed by these results.
“The catalyst provided by the introduction of HTB2 is in danger of being lost, and with a General Election on the horizon plus the ‘Brexit negotiations’ to follow, we could be looking at a much more subdued high LTV market for a longer period of time than is necessary. The Government’s own Housing White Paper will require lenders to commit to high LTV lending, and while a number are, we would like to see more options for low-deposit borrowers, with lenders utilising private mortgage insurance in order to help ‘average first-timers’ purchasing homes at average prices secure access to far more than at best half a dozen product options.”
