"While product numbers have moved upwards for high LTV borrowers, compared to those available at 75% LTV, they are but a drop in the ocean."
Greater lender interest in first-time buyer business has led to a growing number of products for both 75% and 95% LTV borrowers, according to research from AmTrust Mortgage & Credit.
Its data shows the first increase in product numbers across all sectors and terms since AmTrust first started tracking the data.
Two-year product options at 95% LTV have hit three figures for the first time, while all 75% LTV product numbers also increased.
Additionally, despite two increases in Bank Base Rate over the last 12 months, the average rate for a 95% LTV mortgage has seen a significant 34 basis points drop.
Average rates for those with a 25% deposit only increased by 1 basis point up to 1.75% this quarter from 1.74% back in July. The rate differential between 75% and 95% LTV loans has therefore narrowed from 2.21% last time to 1.86%, showing a much more competitively-priced high-LTV sector than in recent years.
However those with smaller deposits continue to pay over 50% more each month than their larger deposit counterparts. Those with smaller deposits pay, on average, £821 per month/£9,852 each year, while those with 25% deposits pay £527 per month/£6,324 per year.
AmTrust believes that, as the year comes to a close, there will be greater competition in the high LTV sector as lenders seek to secure increased business from first-timers and greater margin on their loans.
Pad Bamford, business development director at AmTrust Mortgage & Credit, commented: “Such positive movement is, of course, to be welcomed however we are still concerned on a number of fronts. Saving for a deposit remains the biggest barrier to overcome and we are still at a point where many potential first-timers can only get on the housing ladder with the support of the Bank of Mum and Dad. While product numbers have moved upwards for high LTV borrowers, compared to those available at 75% LTV, they are but a drop in the ocean.
“It means that, not only do first-timers have to save a significant deposit in order to find more product options but they might not meet the affordability criteria – even if they have a 5% deposit – because the monthly mortgage cost is that much more.
“Government support to first-timers has improved, with cuts to stamp duty and the ongoing extension of the Help to Buy Scheme, but at some point the market has to stand on its own two feet and if lenders were able to use tools such as private mortgage insurance to mitigate their risk, not only would they be able to offer more product choice but they could bring pricing down closer to the levels that those borrowers with bigger deposits benefit from.”