Analysis by Genworth reveals the number of mortgage products available to buyers with a 5% deposit has risen by 119 over the last year, from 141 in November 2014 to 260 last month. There are now more than six times as many 95% LTV loans available compared to September 2013 (260 vs. 43), before the Government’s Help to Buy mortgage guarantee launched.
The number of products has risen by 68 in the last three months alone. In comparison, competition in other areas of the market has stayed relatively stable or – in some cases – even declined.
The number of 75% LTV products fell by 38 between August and November this year. The number of 90% LTV loans fell by one, while 80% LTV products rose by just nine in the same period. 85% LTV loans remained constant, with 669 products available.
The research also shows the average rate of a 95% LTV mortgage fell 1.15% from 5.27% in November 2014 to 4.12% last month: the lowest amount since the recession.
Average 75% LTV mortgages also fell by 0.27% annually to 1.90% in November from 2.17% at the same point last year. However, this was 0.07% higher than the record low of 1.83% seen in June 2015. Nevertheless, this means the price gap between 95% and 75% LTV decreased year-on-year by 0.88% to 2.22%: the smallest since the recession.
Off the back of low rates, the number of first time buyers has also increased: Q3 2015 saw the highest number of loans to first time buyers so far this year (86,800), up by 13% from Q2 2015 and 6% more than the 82,100 loans made in Q3 2014. The average first time buyer LTV in Q3 rose from 82% in Q1 and Q2 to 84%, giving the average first time buyer a deposit of 16%, down from 18%. This is unchanged from Q3 2014.
However, Genworth’s analysis raises concerns that lending at 90-95% LTV is actually in decline. There was £1.61bn lent through 90%-95% LTV loans in Q3 2015, down by more than a quarter (27%) from the £2.20bn lent in Q3 2014. This means that 95% LTV loans accounted for just 2.59% of total mortgage lending in Q3 2015 down from 3.3% in Q2 and 3.9% in Q3 2014.
Simon Crone, Genworth Vice President – Mortgage Insurance Europe, commented:
“There is little doubt that the Help to Buy mortgage guarantee has played an important role in rejuvenating the high LTV market. However, beneath the surface, it remains a long way short of full health and there is a danger that what we are seeing is a temporary restoration of appetite from lenders thanks in no small measure to Government efforts.
“For many aspiring first time buyers, raising the average deposit of 16% is simply not an option – especially in places like London where this amounts to vast sums of money. Hopeful buyers struggling to put money aside each month can quickly see deposit sums getting further and further out of reach, which is desperately disheartening when many can afford the repayments on a mortgage once they’ve got over this initial hurdle.
“The Chancellor’s Autumn Statement was clear that more needs to be done to help people enter the property ladder and we welcome the new initiatives announced to achieve this aim. However, these should not come at the expense of using mortgage guarantees or insurance to ensure wider access to high LTV mortgages. The Government scheme has had a positive impact over the last few years and it is dangerous to assume that this would continue without any other scheme in place that incentivises lending and manages risk at the same time.”
