"Rates for higher LTV mortgages actually dropped with lenders seemingly choosing not to inflict any rate rise on 95% LTV borrowers"
Average rates for borrowers with a 5% deposit have dropped below 4%, while the average first-time buyer house price stayed level, according to the latest AmTrust research.
November’s increase in Bank Base Rate has fed through to 75% LTV mortgage rates, which have risen by close to the full 25 basis points, but lenders have opted not to add rate increases to 95% LTV products.
Average fixed-rates for 95% LTV mortgages, according to Bank of England data, continued to fall at the tail end of the year, dipping below 4% for the first time since March 2017. Conversely, average rates for 75% LTV mortgages rose to 1.62% - their highest level since August 2016.
However AmTrust notes that while the rate differential between 75% and 95% LTV mortgages has narrowed, those with small deposits are still continuing to pay on average two-thirds more for their mortgage products annually.
With average rates of 1.62% for 75% LTV loans, and 3.96% for 95% loans this means high LTV first-time buyers will still pay 68.3% more than those with bigger deposits - £5,976 per year compared to £9,816.
AmTrust added that product choice for 95% LTV borrowers is ‘patchy’ with some notable fluctuations in the number of products available, depending on the loan required and house purchase price.
Previously, product numbers were incredibly low for those wanting loans for properties priced at the average first-time buyer level but with only a 5% deposit to put down. However recently, loans for properties priced at £163,813 have grown significantly – up from just one product to 66 for two-year deals, and from six to 164 for those willing to look at a range of terms.
Pad Bamford, Business Development Director at AmTrust Mortgage & Credit, commented: “Our Tracker reveals that some potential bad news for first-time buyers – namely November’s increase in BBR – has yet to filter into increased average product rates. Indeed, rates for higher LTV mortgages actually dropped with lenders seemingly choosing not to inflict any rate rise on 95% LTV borrowers, while those seeking 75% LTV loans did see a rise in pricing somewhat akin to the 25 basis points increase in BBR.
“It means that the differential in pricing between higher and lower LTV products has continued to narrow slightly however, as our research shows, those with smaller deposits will still pay considerably more than their larger deposit counterparts.
“In terms of product choice, those seeking 75% LTV mortgages can still choose from in most cases, hundreds of loans, while those at the higher LTV level remain stuck with a much poorer and increasingly patchy choice. It means that the mortgages first-timers are most likely to need – high LTV ones – are still nowhere near the level we would hope to see.
“Until more lenders recognise the importance of product choice in this part of the market, and perhaps utilise mortgage insurance in order to de-risk their offerings, then first-timers are still going to need large deposits in order to secure anything close to a competitive mortgage. Compared to those with 25% deposits, these borrowers are undoubtedly the poor relations and we really need to see some joined-up thinking in the year ahead in order to ensure ongoing Government measures -designed to improve the lot of the average first-time buyer - are not scuppered by poor product availability.”