For the first time since April 2008, the number of 95% loan-to-value (LTV) mortgages available has passed the 300 mark, signifying increased competition across the mortgage market as borrower numbers decline.
While lower LTVs have experienced a drop in number, the 95% LTV market has increased by 37 in the past month to reach a post-crisis high, according to Moneyfacts UK Mortgage Trends Treasury Report data.
Charlotte Nelson, finance expert at Moneyfacts, said: “Alongside the expansion of 95% LTV deals, the Moneyfacts UK Mortgage Trends Treasury Report shows that the average two-year fixed rate for a 95% LTV has fallen for five consecutive months, reaching 4.02%.”
Incentives for borrowers
Eight lenders re-entered the market in the past month, likely due to the need to reinvigorate their product offering as existing borrowers coming to the end of their mortgage term move to lower rate deals with other lenders. Whilst mortgage approvals have fallen to a five-year low, competition between lenders has been increasing as the pool of potential customers has shrunk.
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At the beginning of March, Sainsbury’s launched four new 95% LTV products aimed at first and second-time buyers. The rates include two-year fixed rates at 3.49% and five-year rates from 3.99%, each with £250 cashback and a free valuation.
David Buxton, head of banking at Sainsbury’s Bank, said: “We believe the 95% LTV market will continue to play an important role in the future of UK mortgage lending. This range of new products, paired with the incentive of free valuation and cashback, will make it possible for first-time buyers, and support second-time buyers, to find their perfect home.”
Positive news for those with smaller deposits
Barclays has just launched three new fee-free high LTV cashback fixed-rate products for first-time buyers. Their 3.94% two-year fixed, £0 product fee, with £500 cashback is available up to 95% LTV for residential first-time buyer purchase.
Hannah Bernard, managing director of Barclays Mortgages, said: “Spring is traditionally a period of increased house buying activity and providing competitive rates will enable more first-time buyers and those with smaller deposits to get on, and move up, the property ladder, as well as helping those looking to remortgage to achieve further savings.”
This market is looking positive for borrowers, especially first-time buyers, looking to purchase with a low deposit. A greater product range means more choice and hopefully a better deal, but they are encouraged not to wait around. With more base rate rises on the horizon, borrowers should be considering their options and acting now, to ensure they can secure a good deal and save money in the long run.
