"Once the summer is out of the way and lenders get more of a handle on their service propositions, that we should start to see high LTV product numbers move upwards again."
Of course, advisers know only too well that this is far from the case, especially at a time when product numbers do not reflect product availability, or indeed the ability to get cases through during a period of severe resource pressure.
However, latest figures from Moneyfacts do appear to show an ongoing trend in terms of falling product numbers, as lenders dip out of the market, some already deciding not to take on any new business until they can work through what is already in their pipeline.
So, we have a situation where total products currently number 4,407 in August, down from 4,556 in July, when this time last year they were at 4,660. Plus, the ‘average shelf life’ of those products has also dipped – if you’re unable to access them within 17 days they are likely to have been pulled, when that number was 21 days in June.
Admittedly, it doesn’t seem like a big difference but tell that to advisers as they burn the midnight oil in order to ensure they can secure the product most appropriate for their client before it goes missing in action.
At lower LTVs the falling number of products might not be seen as too problematic; after all, even now there doesn’t appear to be a shortage of 65%/75% LTV options, albeit the pricing has gone up fairly markedly in recent months. But, at the higher LTVs, this problem becomes more acute.
As you will know, every month I look at product options for first-time buyers at 95% LTV and, as you might expect, given the Moneyfacts data there continues to be a slide in numbers for those who only have a 5% deposit to put down.
Using this month’s Nationwide average house price value of £271,209, and crunching the product numbers for those first-timers with a 5% deposit, we now have a situation where there are 179 product options of all terms. That has slipped from 190 in July, and was up at 245 in April earlier this year.
Fixed-rate options however have only dropped slightly month-on-month, from 163 down to 157, and two-year fixes still number 70, while five-year options are down from 80 to 73.
As you might have anticipated, given the multiple increases in Bank Base Rate (BBR), first-timers with a 5% deposit are going to be paying significantly more for their mortgages than they were earlier in the year.
Again, back in May, you could have picked up a 95% LTV two-year fix at around the 2.4% mark and a five-year fix at 2.7%; now two-year options are coming in over 3.7%, and while there is an outlier five-year fix product available at 3.25%, most of the options are over 3.9%/4%.
In essence, we are back to the pricing that reopened the 95% LTV market in the early part of 2021 when the Government’s Guarantee Scheme acted as a necessary catalyst, and lenders were making their first tentative forays back into the sector.
The anticipation has to be that this pricing trend will continue, although I am positive that, once the summer is out of the way and lenders get more of a handle on their service propositions, that we should start to see high LTV product numbers move upwards again.
However, we do have to consider a marketplace beyond 2022, especially as the Government Guarantee scheme will close at the tail end of this year. From the initial soundings of both candidates for Prime Minister, there is likely to be continued support for first-time buyers but this will need to be married up with ongoing high LTV mortgage product availability, and a supportive environment for lenders to keep active in this space.
The recent decision to remove the mortgage affordability stress test may well help more first-time buyers to secure a mortgage, but from what I have seen, few (if any) lenders have moved to change and you would argue that, especially given the current economic environment, this is the responsible approach to take.
What we would not want to see is a continued slide in high LTV mortgage product options, especially as we are not long back to a fully-functioning market. There is no doubt that 95% LTV mortgages are vital in helping first-timers onto the ladder; current pricing is higher than it has been but is still historically competitive, and lenders have tools at their disposal such as private mortgage insurance to protect themselves from any perceived higher risk.
If house prices continue to stabilise/slip back, and the Government continues to support first-timers, then we will undoubtedly need more lenders active in the high LTV space, and more product options. The opportunities to mitigate risk are there for lenders in a post-Guarantee Scheme world, and the benefits both they and borrowers can get from access to these products will turn more of Generation Rent into Generation Buy.
