There has been a sharp reduction in the gap between mortgage rates at different Loan-To-Value (LTV) ratios over the past 12 months, according to Mortgage Brain’s latest quarterly product data analysis.
The breakdown of all main product types in the UK mortgage market for a repayment mortgage is calculated by the lowest rate for a property worth £180,000.
Latest figures – as of 1 October 2014 – show that the lowest rate five-year tracker with a 90% LTV (at 3.65%) is now just 8% higher than the same product with a 60% LTV (3.39%). The same analysis 12 months ago showed a 71% increase between the lowest rate 60% and 90% LTV products.
Similar reductions have also been seen in the gap between the lowest rate two year tracker mortgages. In 2013 the lowest rate 90% LTV product was 112% higher than the same product with a 60% LTV – now, the rate difference has dropped to 73%.
The buy-to-let sector, by comparison, has behaved very differently with current data showing that the gap between the lowest rate two year Fixed products (60% and 80% LTV) increased by 9% from 66% in 2013 to 77% as of 1st October 2014.
In October 2013 the lowest rate two-year tracker with an 80% LTV was 77% higher than its 60% LTV counterpart. 12 months on and the gap has widened to 87% with the 80% LTV product currently listed with a rate of 3.73% compared to 1.99% for the 60% LTV product.
Mortgage Brain’s latest analysis also gives an up-to-date picture on mortgage rates over the past three months with mixed movement seen for all main product types.
The lowest rate two year fixed (90% LTV), for example – at 3.39% – has increased by 13% since July 2014, whereas the lowest rate product with a 60% LTV (at 1.49%) dropped 6% over the same period.
Conversely, the lowest rate three year tracker with a 60% LTV dropped 13% over the past three months, with the same product with a 90% LTV holding a rate of 2.95% since July 2014.
Longer term products, however, showed no movement whatsoever over the past three months with the lowest rate five year fixed and tracker mortgages (60% and 90% LTVs) maintaining the same mortgage rates since July 2014.
The most noticeable changes in the buy-to-let market can be seen in the form of the lowest rate two-year fix with a 60% LTV, which has increased 7% over the past three months – up from 2.19% in July to 2.34% as of 1st October 2014.
Two year trackers performed much better, however, with rate reductions being seen since July for the lowest rate 60% and 80% products, which are down 5% and 6% and currently stand at 1.99% and 3.73% respectively.
Mark Lofthouse, CEO of Mortgage Brain, said: “Overall the figures from our latest analysis should not come as huge surprise. With the threat of a rise in base rates ever increasing purchase mortgages were always likely to rise.
“The drop in the gap between 90% and 60% LTV rates, however, will be welcomed by those with small deposits. It comes on the back of a number of years when the gap was increasing and should help new home owners to take their first steps on the housing ladder.”