Special Features

The importance of advice in a dwindling 95% LTV market

Rozi Jones
|
12th November 2019
house price broker adviser hands
"Opportunities are therefore increasing for intermediaries, not just on single mortgage transactions but by setting up the adviser-client relationship across generations and product segments."

Financial Reporter has covered numerous articles over the past few months relating to a fall in the number of 95% LTV mortgages available on the market and rising rates across the remaining products.

Moneyfacts data shows that 95% LTV mortgage rates have started to creep up over the past couple of months, with two and five-year fixed rates reducing in every LTV tier except for 95% in August.

Further research from Moneyfacts found that the total number of products at 95% LTV fell from 391 deals in August to 380 in September.

Similarly, figures from AmTrust revealed that 95% product rates are beginning to rise and the number of products available on the market is continuing to fall, describing the changes as a 'double-whammy' for first-time buyers.

As a result, those with smaller deposits are now paying £1,011 per month on average – the first time the monthly amount has gone past £1,000 since AmTrust began tracking the data.

The firm believes fall in product options could be a result of a number of lenders – such as Sainsbury’s Bank and Tesco Bank – leaving the market.

Additionally, lenders also appear to be moving back towards a risk-averse strategy, offering more products for buyers with larger deposits.

However the decline in products and rise in rates doesn't appear to be hindering first-time buyers - yet.

Recent figures from the NAEA show that first-time buyer sales hit seven-month high in September. However, it will be interesting to see whether these rate changes at 95% LTV, combined with economic uncertainty and a risk-averse approach from lenders, will begin to feed into first-time buyer completion figures in the winter months.

As rates begin to rise, so will the importance of advice. Most first-time buyers would probably fail to look past a headline rate to consider fees, cashback and other factors in their mortgage deal which could save (or lose) them money in the long run.

Additionally, the desire to own a home amid contracting product choice and ever-growing deposits is leading more first-time buyers to rely on the Bank of Mum and Dad, or increasingly the Bank of Granny and Grandad. This further highlights how advice can be vital in helping entire families to choose the most appropriate option for them, whether it involves equity release, becoming a guarantor, gifting a deposit, or taking out a joint borrower sole proprietor mortgage which are increasing in number and popularity.

Opportunities are therefore increasing for intermediaries, not just on single mortgage transactions but by setting up the adviser-client relationship across generations and product segments.

If the 95% LTV market continues to contract in the long term and small-deposit borrowers struggle to access affordable mortgage deals from high street lenders, financial advice will be even more crucial to ensure that the first-time buyer market continues to flourish.

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