The latest AmTrust Mortgage Loan to Value (LTV) Tracker has found that mortgage pricing inched up over the last quarter across the board.
However first-time buyer borrowers, who are only able to put down a 5% deposit, continue to have far less product choice and pay increasingly more for their loans than those who are able to put down 25%.
The tracker reviews the average monthly mortgage payments for first-time buyers on average loan levels, comparing loans for those with a 5% deposit to those with 25%.
June’s Monetary Policy Committee (MPC) vote on Bank Base Rate (BBR) – 5-3 in favour of holding at 0.25% – has set the market talking about an impending rate rise; however AmTrust’s research shows that lenders have already started to increase mortgage product rates with 95% LTV loan borrowers continuing to face faster-paced increases than those who can secure 75% LTV loans.
First-time buyers, who have to opt for 95% LTV products, can now typically expect to pay over 70% more than those who are able to put down 25% of their property’s value.
The monthly and annual mortgage cost has increased for both 75% and 95% LTV mortgages since the last iteration of the Tracker as average rates have increased for both, however 95% LTV mortgage borrowers continue to pay significantly more.
Homeowners with a 5% deposit pay an average of £823 in monthly repayments, £341 more than the £482 paid each month by those with 75% LTV mortgages.
In the last quarterly AmTrust LTV Tracker the difference was £324 per month.
Table 1: Average monthly repayments: 75% LTV mortgages and 95% LTV mortgages*
| 75% LTV mortgage | 95% LTV mortgage | Difference 75-95 | |
| Deposit | £40,242 | £8,048 | £32,194 |
| Loan | £120,725 | £152,919 | |
| Interest rate May 2017 (average) | 1.49% (1.37%) | 4.19% (4%) | 2.7% (2.63%) |
| Monthly fixed payment (two years) | £482 (£466) | £823 (£790) | 70.7% (69.5%) |
| Annual payment | £5,784 (£5,592) | £9,876 ((£9,480) | 73.1% (69.5%) |
Source: AmTrust Mortgage & Credit, Money Saving Expert, CML, Bank of England
Figures in brackets – Q1 LTV Tracker results.
*Based on an average first-time buyer house price of £160,967 (CML – May 2017)
According to the Bank of England, average interest rates for 75% LTV mortgages have risen since the start of 2017, now standing at 1.49%, up 0.12% from 1.37% in March this year. However, this is still down considerably on the rate of 1.91% in March 2016.
95% LTV average mortgage rates have also risen but by a greater pace than those for 75% LTV products. They now stand at 4.19%, up 0.19% since March this year.
The average rate for 95% LTV mortgages has continued to increase throughout 2017 from its December 2016 low of 3.62%. The price differential between 75% and 95% LTV mortgages has also continued to rise since the last iteration of AmTrust’s LTV Tracker, rising from 2.63% in March 2017 to 2.7% now.
AmTrust believes that while the mortgage market is maintaining its competitive edge for those borrowers with larger deposits, this is not the case for those who only have 5% to put down on a property purchase. Rates continue to rise at a faster pace and 95% LTV borrowers continue to pay far more than those on 75% LTV products.
This iteration of the AmTrust LTV survey continues to review the number of actual product options available to first-time buyers with either a 5% or 25% deposit based on the price of an average first-time buyer house, the price of an average house as outlined by the June 2017 Halifax House Price Index, and the price of a house at the top of the first tier of stamp duty land tax.
In order to do this, AmTrust used one of the online mortgage search engines which includes deals available to both mortgage advisers and direct-only.
The search revealed that, for those wanting to purchase a property at both the average first-time buyer price in the UK (£160,967) and the average UK house price (£218,390), with only a 5% deposit/equity, there continues to be only one two-year product available, and just five products in total (across all terms and all deals). This, compared to the hundreds of products available for those with a 25% deposit, shows the difference in lender appetite – and the all terms/all deal product numbers have actually dropped by 1 product since the last iteration of the LTV Tracker, down from six to five.
Product availability has also dropped for those seeking to purchase at a house price of £250,000 with a 5% (£12,500) deposit. In the Q1 survey there were 62 two-year products of all types – this has now dropped to 59; while there are now 150 products of all types/all terms, this has dropped from 155 products.
In comparison, those seeking smaller loans to purchase lower-priced homes – in this case £160,967 – have seen a significant increase in 75% LTV product availability.
Table 2: Number of products currently available at 75% and 95% LTV at three different house price levels
| House price | 75% LTV – two-year term/all mortgage deals | 75% LTV – all terms/all mortgage deals | 95% LTV – two-year term/all mortgage deals | 95% LTV – all terms/all mortgage deals |
| £160,967
(CML – average price of a first-time buyer home May 2017) |
548 products
(157) |
1,305 products
(873) |
1 product
(1) |
5 products
(6) |
| £218,390
(Halifax House Price Index – average UK property price June 2017) |
351 products
(362) |
864 products
(872) |
1 product
(1) |
5 products
(6) |
| £250,000
(Upper threshold of first Stamp Duty Land Tax tier) |
540 products
(536) |
1,293 products
(1293) |
59 products
(62) |
150 products
(155) |
Source: AmTrust Mortgage & Credit, Money Saving Expert, CML, Bank of England, Halifax
Figures in brackets – product numbers Q1 LTV Tracker results.
Pad Bamford, business development director at AmTrust Mortgage & Credit, said: “It’s clear that while there is some softening of the mortgage market across the board – in terms of average rates and product availability – the impact on those with low levels of deposit is far greater than for those who can muster 25% or more. Given that first-time buyers tend to be in the former bracket, it is they who are suffering the most as rates rise by more, monthly/annual mortgage payments increase whilst at the same time product availability continues to drop.
“When the Help to Buy 2 Scheme was terminated, the government suggested it was because levels of 95% LTV mortgages had returned to normal, however as our LTV Tracker clearly shows, when it comes to being able to purchase average-priced homes the number of 95% LTV products is actually falling. First-time buyers might be lulled into a false sense of security if they read that there are hundreds of 95% LTV loans available for their needs – the true number is likely to be much less.
“We would therefore suggest that this is not a level of ‘normality’ that is able to support those borrowers who would like to get on the housing ladder but only have a small deposit to do so. The government’s Queen’s Speech talked about improving the supply of new homes but we also need to confront the reality of the lending market at the moment.
“New homes can only be bought if the finance is readily available, and if we do not have a strong supply of high LTV mortgages on offer, then we are unlikely to get the numbers of new homeowners onto the property ladder that is desired by all stakeholders.
“The uncertainty that has resulted from the General Election result and the Brexit negotiations is only likely to dampen the housing market further, and we are in danger of lenders continuing to retreat into their shells when it comes to high LTV lending.
“This is already starting to happen with pricing on the up and product numbers down; lenders need to be encouraged to look at this market, mitigate their risk by the use of private mortgage insurance in order to offer high LTV loans, and seek to support those many potential first-timers who are not lucky enough to have the Bank of Mum and Dad to rely upon for their deposits. First-timer buyers with smaller deposits deserve far better than a market of one to five products which continue to come at a rising cost.”