Increase In 95% LTV Mortgage Products Helping Buyers

The number of lenders offering mortgages to low deposit buyers has increased significantly in the last decade.

According to figures obtained from Moneyfacts.co.uk, since 2009 the number of providers offering mortgages to savers with a 5% deposit has increased from just 3 to 60 lenders offering between two and five-year fixed rate 95% Loan to Value (LTV) mortgages.

Additionally, in the past decade, the interest being charged to customers on these products has also started falling considerably.

In April 2009, a five-year fixed rate 95% LTV mortgage product would yield a rate of 7.09%.

Just 4-years later in 2014, 47 providers were offering 153 95% LTV mortgage products with interest rates falling to 5.48%.

Last year, 246 95% LTV mortgages products were shared between 53 lenders. This rise in products improved the average interest terms for the buyer to 4.44%.

Now, 60 lenders have entered the 95% LTV mortgage products. The 338 fixed rate products have reduced interest rates for five-year fixed rate interest rates to just 3.73% with two-year fixed rate options yielding interest rates of 3.28%.

In 83% of available products, savers with low deposit options are offered fixed rate deals, suggesting that buyers, potentially on a budget, prefer the certainty of a regular monthly repayment.

According to the e.surv mortgage survey, there were 66,174 approved mortgages in March, representing a 4% increase on March 2018 and a 2.9% increase on February’s figures.

Over the past two months, the report indicates that small deposit borrowers have made up over a quarter of mortgage approvals for the months of February and March, with a market share of 26.3% and 26% respectively. This means that last month alone, over 17,000 mortgages were approved to buyers with smaller deposits.

Darren Cook, Finance Expert at Moneyfacts.co.uk, commented:

“A decade ago, borrowers who could only raise a 5% deposit had just three products from three mortgage providers to choose from. Today, a borrower can choose between 405 products available from a total of 60 providers. As more firms become willing to lend at this higher-risk tier, it means that potential homeowners have a greater choice of products, incentives and service, which can only be good news for borrowers.”

Richard Sexton, Director at e.surv, said:

“Mortgage rates have increased slightly compared to the rock-bottom lows of the last few years. However, rates are still close to their historic lows which is good news for those looking to take their first steps. This is reflected in the number of approvals this month.”

Whilst many first-time buyers continue to exploit Help to Buy, it is clear that there are alternatives that could enable more savers to achieve their property dream considerably quicker in the future.

Have you noticed an increase in buyers with smaller deposits being offered favourable mortgage terms?

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