Increase In High LTV Mortgages Offers Hope For FTBs

A raft of new 10pc deposit mortgage deals together with increased incentives offers hope for would-be first-time buyers.

Figures published last week showed the number of new mortgage deals on the market is the highest since the start of the first coronavirus lockdown in March 2020. The data provider Moneyfacts, which issued the figures, states there has been a large increase in the availability of 90pc loan-to-value (LTV) deals, 248 this month compared with 70 last July.

This could be an indication that banks and other lenders are feeling more confident.

The latest data reveal that the first-time buyer market shows signs of recovery from the low point of just a few months ago, although rates look much less competitive than before the start of the pandemic in February last year. In fact, most lenders scrapped their 90pc LTV deals, which are often used by first-time buyers with 10pc deposits to put down on a home.

The new data show that there are still 277 90pc LTV deals available this month, more than at the lowest point in the market, but not as many as the 776 deals offered in February 2020. In addition, the total number of products in the 90pc category increased by 29 in the first two weeks of February alone.

Whereas the market lost 88 deals between the start of January and February.

Credit scoring for mortgages tougher

Furthermore, buyers with a 10pc deposit are benefitting from more cashback offers, according to the latest survey which shows mortgage deals with incentives increased from 50 to 83 over the past month.

But it’s a different story when it comes to the rates buyers with high LTV products are paying. The data show the average two-year fixed rate of 3.56pc was almost 1pc higher in January than the same rate a year earlier. The five-year fixed rate equivalent at 3.68pc, although 0.04pc lower since the start of this month is still 0.77pc higher than the rate in February 2020.

Mortgage broker Habito says buyers could make lower monthly repayments if they are able to drop down to the next LTV band, 85pc and put down a 15pc deposit. Last week, a two-year fix was available at 85pc LTV for 2.54pc from intermediary mortgage lender Platform.

But Mark Harris of mortgage broker SPF Private Clients, cautions just because high LTV mortgages are more readily available doesn’t mean it is necessarily easier to obtain one. Credit scoring is tougher, so that only the best borrowers who gain an ‘A’ score can access the better high street products.

Cashback incentive for FTBs

Eleanor Williams, Finance Expert at Moneyfacts, said although some buyers may view the end of the stamp duty holiday as a disappointment, those moving onto the property ladder for the first time may enjoy an advantage, especially if their purchase is below the existing £300,000 tax threshold.

She believes the choices for those with a 10pc deposit have increased significantly over the last few months, with not only 15 more lenders offering 90pc LTV products but 117 more products to choose from since the start of this year alone. This represents a far greater choice for would-be first-time buyers. Then there is the added bonus of cashback deals for them.

Average rates, she said, historically have often been higher than those available in lower LTV categories due to risk. And although they are higher than a year ago, those who would prefer the certainty and longer-term stability of a five-year fixed deal will be pleased to see this rate has fallen by 0.04pc since the start of February.

All the same, Williams mentioned a number of challenges that exist for first-time buyers, such as low interest rates on savings and high house prices. But she added the options for these consumers have steadily increased.

And with the news that homebuyers using the current Help to Buy equity loan scheme have been granted a further extension to the deadline for completions, there is optimism that 2021 may see more potential home buyers take the first step onto the property ladder.

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