Mortgages

First-time buyers see rising costs despite falling rates: AmTrust

95% LTV borrowers continue to pay close to 50% more for their mortgages than those at the 75% LTV level.

Rozi Jones
|
12th April 2019
pound coins money scales balance house prices
"Even with rates continuing to hover close to record lows, increased house prices mean that the average mortgage amount both a 75% and a 95% LTV borrower must pay has risen."

Mortgage rates are continuing to fall, but a "significant increase" in the cost of the average first-time buyer house has resulted in increased monthly and annual costs, according to the latest AmTrust data.

95% LTV rates have dropped from 3.23% in Q4 to 3.03%, while there was also a drop in average 75% LTV rates with a quarterly fall from 1.75% to 1.68%.

However the UK Finance figures show that the average first-time buyer house has increased from under £169,000 to over £177,000.

Additionally, 95% LTV borrowers continue to pay close to 50% more for their mortgages than those at the 75% LTV level.

Those with smaller deposits pay £801 per month/£9,612 each year on average, while those with 25% deposits pay £543 per month or £6,516 per year.

AmTrust's product data also shows greater appetite to lend to first-time buyers with small deposits continues to translate into greater product choice for 95% LTV borrowers.

Conversely, 75% LTV product options have fallen by close to 10%, although 75% LTV borrowers can still access over five times as many mortgage products as their 95% LTV counterparts.

Patrick Bamford, business development director at AmTrust, commented: “This iteration of our LTV Tracker comes complete with a number of in-built contradictions.

“On the one hand average rates for both 75% and 95% LTV borrowers have fallen, which ordinarily might result in a continuing fall in monthly and annual mortgage payments for first-timer buyers. However, this is not the case because the average first-time buyer house, according to UK Finance, has risen in cost by close to £10,000 since the last Tracker, resulting in the requirement for an increased deposit and an increased loan amount which has increased mortgage costs.

“So even with rates continuing to hover close to record lows, increased house prices mean that the average mortgage amount both a 75% and a 95% LTV borrower must pay has risen.

“On the product front, we also have some significant movement from lenders, particularly when it comes to the product availability for 75% LTV borrowers which has fallen for the second Tracker in a row. At the same time, we’ve seen the number of 95% LTV products continuing to rise perhaps showing that lenders are continuing to look for mortgage business which might previously have been considered as riskier due to the small amount of deposit being put down.

“The fall in 75% LTV product options might also be partly down to the recent announcements by a number of lenders that they are now closed for new business, although with only a handful of lenders doing this, you would not think this would amount for the nearly 10% reduction we have seen.

“It’s far more likely that we are seeing lenders continuing their search for greater margin levels which means they are now far more willing to look beyond ‘normal’ parameters and to improve their offering for high LTV borrowers. The product number differential is still a chasm but it is always positive to see those with 5% deposits having a greater number of products to choose from.

“In the near future there are a number of important decisions to be made by the Government and the regulators around the provision of high LTV loans and we believe that a growth in private mortgage insurance can help sustain and grow the number of products available to those who are unable to rely upon the Bank of Mum & Dad to help them onto the property ladder.”

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