95% LTV rates up 0.25% since end of Help to Buy

The end of Help to Buy has contributed to rising high-LTV rates, according to new Moneyfacts data.

Related topics:  Mortgages
Rozi Jones
11th April 2017
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"While all lenders who previously took part in the H2B scheme have since launched standard products, they are now exposed to the full risk of offering a 95% deal"

The average two-year fixed rate at 95% LTV has increased by 0.25% since January 2017, when figures were at a historic low, bringing the figure back to around the same rate it was a year ago.

95% LTV rates now stand at 4.14%, just below the 4.15% average seen in April 2016.

Charlotte Nelson, Finance Expert at Moneyfacts, commented: “This increase to the average two-year fixed rate at 95% LTV is in part due to the current uncertainty in the market, particularly the inflationary pressures. As inflation rises, the probability of borrowers defaulting also rises, due to household expenditure being adversely affected. This makes the low rates seen previously unmaintainable.

“The 95% LTV market has also seen a significant adjustment with the removal of the Help to Buy mortgage guarantee scheme in December 2016. The scheme provided a significant boost to the market, not only by increasing product availability but also as a catalyst for mortgage competition in this key area of the market.

“While all lenders who previously took part in the H2B scheme have since launched standard products, they are now exposed to the full risk of offering a 95% deal, which was previously shared with the Treasury. Instead of swallowing the extra cost, these providers are choosing to pass it on to the borrower in the form of higher rates.

“Providers outside the scheme had to compete fiercely with the H2B scheme, pushing rates ever lower and slowly taking on the extra risk that those in the scheme did not. As these providers are now no longer competing with H2B deals, this may be pushing rates up as well, with these lenders no longer needing to sacrifice their safety margins to remain competitive."

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