High LTV availability cuts saving time by up to eight years

The greater availability of mortgage loans at high LTV ratios is having a "huge effect" on the time it takes first-time buyers to save a deposit, according to Hamptons International research.

Related topics:  Mortgages
Rozi Jones
2nd May 2017
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"Lenders are increasingly offering higher loan to value mortgages and the rates charged on them have come down more than for any other mortgage type."

In Q4 2016 it would take an average single first-time buyer 11 years and nine months to save a 15% deposit. But reducing the deposit to just 5% would cut seven years and nine months off the time to save a deposit meaning it takes just four years to save a deposit.
 
The proportion of loans made at 90% or more was 5% in 2016, up from 3.8% in 2015 and this increasing availability of lending at higher LTVs, combined with lower mortgage rates, has improved the ability to buy for first time-buyers.

Loans above 90% now account for more than three times the proportion of all loans than they did after the crash in 2009, and the cost of borrowing at over 95% has fallen by more than other types of loans.

However when looking at saving a 15% deposit, the average length of time it took for a single first-time buyer to save in Q4 2016 was 11 years and nine months, a whole year longer than in Q4 2015 as rising house prices outpaced growth in incomes.

A single Londoner hoping to buy for the first time would need to save for 18 years and three months  to raise a 15% deposit – up from 15 years at the end of 2015, while a couple would need 11 years and three months – a year longer than in Q4 2015.
 
In London saving a 10% deposit cuts nearly six years off the time it takes to save, and raising just a 5% deposit cuts the time by 12 years to six years and three months.

Fionnuala Earley, Residential Research Director at Hamptons International, said: “It still takes an average single buyer nearly 12 years to save a 15% deposit for their first home. That’s a whole year longer than at the end of 2015. But it’s not all bad news. Lenders are increasingly offering higher loan to value mortgages and the rates charged on them have come down more than for any other mortgage type.

"Taking advantage of help to buy or taking out a 90% mortgage means that the time to save a deposit falls substantially. Rather than 12 years, a single buyer can save a deposit in just over eight. And if they use help to buy and save just a 5% deposit, they can save up in just four years.”

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