Image of Greg Oxenham. Mortgage ID Cardiff

High loan-to-value mortgages dodge base rate rise

Borrowers looking for high loan-to-value (LTV) mortgages appear to have been spared the impact of the Bank of England’s Base Rate rise as typical interest rates appear to have fallen.

The data from credit insurer AmTrust also appears to show an improvement in general for first-time buyers (FTBs) looking to purchase with small deposits – however they still pay more than those with larger deposits.

And overall the insurer echoed many views that the cut in stamp duty for first-time buyers will simply increase house prices and mean these borrowers will face bigger deposits and more expensive mortgages.

According to the AmTrust Mortgage LTV Tracker, interest rates for 95% LTV deals fell below 4% despite the November Bank of England rate rise as lenders cut these rates.

However, those looking for a deal in the 75% LTV market saw almost the full force of the rate increase.

Bigger deposits needed

Image of Greg Oxenham. Mortgage ID CardiffAmTrust suggested lenders might be keeping rates for low-deposit borrowers down in order to benefit from any greater interest in purchasing from FTBs as a result of stamp duty cuts.

Product availability in this sector also improved, particularly for those buying around the average house price for first-time buyers.

But despite this slight convergence in average rates, high LTV first-time buyers will still pay 68.3% more than those FTBs with bigger deposits – £5,976 per year compared to £9,816 – to buy an average valued property.

Encouragingly, FTB loans for properties priced at £163,813 have grown significantly – up from just one product to 66 for two-year deals, and from six to 164 for those willing to look at a range of terms.

However, there has been a big drop in availability for those wanting larger loans with smaller deposits.

And overall product choice for those wanting 95% LTV loans is still ‘incredibly’ small across the board compared to those first-time buyers who are able to find a 25% deposit, said the firm.

Greater first-time buyer activity

AmTrust Mortgage & Credit business development director Pad Bamford noted that while in terms of product choice, the mortgages first-timers are most likely to need – high LTV ones – were still nowhere near the level hoped for.

“The latest figures from UK Finance on first-time buyer activity throughout 2017 appear to show further growth, with the anticipation that there will be more first-timers purchasing than home movers in 2018,” he said.

“However, potential first-time buyers with small deposits are hamstrung in today’s mortgage market.

“Compared to those with 25% deposits, these borrowers are undoubtedly the poor relations and we really need to see some joined-up thinking in the year ahead in order to ensure ongoing Government measures – designed to improve the lot of the average first-time buyer – are not scuppered by poor product availability,” Bamford added.