The difference between rates offered to borrowers with different loan-to-value mortgages has come down in the last year, data from Mortgage Brain has revealed.
According to the mortgage research company’s analysis, from 1 October this year, the lowest rate five-year tracker with a 90 per cent LTV at 3.65 per cent is just 8 per cent higher than the same product with a 60 per cent LTV at 3.39 per cent.
The data analysis involved a breakdown of all main product types in the UK mortgage market for a repayment mortgage, and was calculated by the lowest rate for a property worth £180,000.
According to the figures, the same analysis 12 months ago showed a 71 per cent increase between the lowest rate 60 per cent per cent and 90 per cent LTV products.
Longer-term loans showed no movement in the three months ending 1 October with the lowest rate five-year fixed and tracker mortgages (60 per cent and 90 per cent LTVs) maintaining the same mortgage rates since July 2014.
| Key Points |
In 2013 the lowest rate 90 per cent LTV product on a two-year mortgage was 112 per cent higher than the same product with a 60 per cent LTV. Over the past 12 months this dropped to 73 per cent. In the buy-to-let sector, the gap increased from 66 per cent in 2013 to 77 per cent for two-year fixed products at 60 per cent and 80 per cent LTV as at October 2014. |
Mark Lofthouse, chief executive of Mortgage Brain, said: “Overall the figures from our latest analysis should not come as a 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 per cent and 60 per cent 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 homeowners to take their first steps on the housing ladder.”
Adviser view
Steve Harness, director of business development for Norwich-based Turnkey Mortgages, said: “With mortgage repayments in many cases now cheaper than rents for comparable properties, the narrowing of the price gulf between lower and higher LTV bands will be welcomed by first-time buyers, who typically have a smaller deposit.
“The sophisticated scorecards used by lenders clearly assure them that LTV is not a sole driver of risk, and that the strength of the borrower is just as important.
“Conversely, it is no surprise that higher LTV buy-to-let mortgages continue to show a higher relative rate loading. No doubt lenders are worried that would-be investors who can afford only the minimum deposit may not have the necessary financial strength to be a professional landlord.”
