There are six times as many products for 75% loan to value borrowers than at 95%

Posted on Thursday, January 17, 2019

First-time buyers with a 25% deposit have access to over six times as many mortgage products as those who are only able to put a 5% deposit down, mortgage insurer AmTrust’s latest mortgage LTV tracker has found.

The monthly mortgage cost disparity for average first-time buyers seeking averagely-priced homes continues to be high, with 95% LTV borrowers continuing to pay close to 50% more for their mortgages than those at the 75% LTV level.

On average those with smaller deposits pay £780 per month/£9,360 each year, while those with 25% deposits pay £521 per month/£6,252 per year.

Patrick Bamford, business development director at AmTrust Mortgage & Credit, said: “Clearly, over the last year we have seen a renewed interest in the high LTV first-time buyer mortgage market from a number of lenders, and this increased competition has led too far greater product choice plus more competitive rates.

“To see the average 95% LTV mortgage rate not too far away from 3% is most pleasing, and the differential between higher and lower LTV products has narrowed significantly, especially in the second half of 2018.”

The cost of mortgages has however fallen for both 75% and 95% LTV first-time buyers with borrowers continuing to benefit from increased competition amongst lenders in this mortgage space.

The average mortgage rate for a high LTV mortgage product dropped from 3.61% in Q3 last year to 3.23%, while there was a very slight drop in average rates for 75% LTV borrowers, with a quarterly fall from 1.75% to 1.74%.

The rate differential between 75% and 95% LTV loans has continued to narrow, down to 1.49% from 1.86% in Q3 and 2.21% in Q2 last year.

AmTrust puts this down to more lenders willing to look at high LTV borrowers, an increase in interest in more niche mortgage product sectors to make up for falling purchase activity and an anticipated drop in overall activity as more borrowers opt for longer-term fixed-rate remortgage options.

AmTrust believes that, with ongoing political and economic uncertainty generated by ‘Brexit’ meaning more potential purchasers are adopting a ‘wait and see’ approach, lenders will continue to maintain competitive rates to look for more first-time buyers.

There’s an increase in product numbers across the entire 95% LTV product sector, but a fall for all 75% LTV options.

The 2-year product options for 95% LTV top 100 for the first time across all three scenarios, while those looking at all mortgage terms and options, have more than 240 products to choose from.

But, while the differential between 95% LTV and 75% LTV products has been narrowed, those lucky enough to have a bigger deposit have access to over six times as many products as their lower deposit counterparts.

Over 700 products are available to those wanting a 2-year deal, while this number more than doubles to over 1,500 products for those reviewing all terms and all product options.

AmTrust believes this ongoing and significant product choice disparity can be closed even further if more lenders reviewed their lending activity in this area and used a credit-risk mitigant such as private mortgage insurance to boost product options and cut rates far closer to the level for lower LTV products.

Bamford added: “There are six times as many products available for 75% LTV borrowers and this disparity is far too great.

“We have seen more lenders launching products in this marketplace, and we suspect that as the ongoing uncertainty of Brexit impacts further on the housing and mortgage markets, that we’ll see many more lenders looking to diversify into this area.

“But, at best, this might add tens of products to the choice available, rather than the hundreds which might signal a real resurgence in the first-time buyer/high LTV mortgage market.”

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