First-time buyers with small deposits are currently making savings of around £800 a year, compared to last year, meaning the end of the Help to Buy two scheme is set to deliver an even harsher blow.
Genworth Moneyfacts loan-to-value research revealed for those with a 10 per cent deposit, lower mortgage interest rates mean they can save £67 a month compared to what they would have paid had they taken out the same loan a year ago; equating to an £804 saving annually.
As for those with 5 per cent deposits, the research revealed the monthly payment for an average first-time buyer home was £66 per month less in March 2016 compared to 2015, equating to annual savings of £792.
Part of the reason for these rates is increased competition, according to Simon Crone, European vice president for mortgage insurance at Genworth, who added the number of mortgage products at high LTVs has risen in recent months.
The number of 95 per cent LTV deal rose from 195 last March to 267 this year, according to Genworth.
As a result, Mr Crone said rates at this LTV reached a record low of 3.92 per cent in March, 0.8 per cent less than a year before, while rates for 90 per cent LTV loans are also much cheaper, having fallen 0.92 per cent to 2.82 per cent.
However, the total amount of high LTV lending has stagnated, even while overall lending has increased, demonstrating that while lenders may be competing for the best customers in the high LTV bracket, they are more focused on increasing lending to customers with larger deposits.
Lending to those with a 5 per cent deposit was boosted by the introduction of the Help to Buy Mortgage Guarantee Scheme, with the proportion of lending at this level climbing from 1.7 per cent in the fourth quarter of 2013 to 3.1 per cent in the first quarter of 2014,
The amount of lending to those with a 5 per cent deposit has now stagnated at around 3 per cent in 2015.
The research stated this was particularly concerning given that the Help to Buy Mortgage Guarantee scheme is due to end after this year, with nothing scheduled to replace it.
Table 2: Lending by LTV as a percentage of total mortgage lending post HTB2
2013 | 2014 | 2015 | |||||||
Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
Value of total lending (£bn) | 51.5 | 47.1 | 51.5 | 55.9 | 51.4 | 45.6 | 52.6 | 62.1 | 63.1 |
75% LTV | 64.6% | 64.8% | 64.6% | 64.2% | 64.6% | 67.6% | 65.9% | 65.5% | 66.4% |
90% LTV | 33.2% | 31.6% | 30.9% | 31.5% | 31.6% | 29.0% | 30.5% | 31.2% | 30.4% |
95% LTV | 1.7% | 3.1% | 4.2% | 4.0% | 3.5% | 3.0% | 3.3% | 3.1% | 3.0% |
Source: PRA/FCA, Genworth
Mr Crone said: “High LTV lending received a much needed boost through the introduction of the Help to Buy Mortgage Guarantee, however it is concerning to see this already in decline while the rest of the market is going from strength to strength.
“Looking forwards, the high LTV market is facing a potential double blow from the end of HTB2, plus higher capital requirements for lenders offering mortgages to those with small deposits as a result of proposed Basel changes.”
He added: “All the evidence points to the fact we have seen just a temporary restoration of high LTV lending, and when HTB2 finishes at the end of the year, appetite for lending to those with small deposits will decline further and many more hopeful first time buyers will be priced out unless they can secure help with a deposit.”
peter.walker@ft.com
