MortgagesOct 9 2014

Rate difference between LTV bands closes: Mortgage Brain

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There has been a sharp reduction in the gap between mortgage rates at different loan-to-value ratios over the past 12 months, according to quarterly product data analysis from Mortgage Brain.

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, with figures to 1 October showing the lowest rate 5-year tracker with a 90 per cent LTV (at 3.65 per cent) is now just 8 per cent higher than the same product with a 60 per cent LTV (3.39 per cent).

The same analysis twelve months ago showed a 71 per cent increase between the lowest rate 60 per cent and 90 per cent LTV products.

Similar reductions have also been seen in the gap between the lowest rate 2-year tracker mortgages, with the lowest rate 90 per cent LTV product in 2013 being 112 per cent higher than the same product with a 60 per cent LTV now, a rate difference drop of 73 per cent.

By comparison, Mortgage Brain analysis showed that the buy to let sector behaved very differently, with current data showing that the gap between the lowest rate 2-year fixed products (60 per cent and 80 per cent LTV) increased by 9 per cent to 77 per cent from 66 per cent in 2013.

A year ago the lowest rate 2-year tracker with an 80 per cent LTV was 77 per cent higher than its 60 per cent LTV counterpart, but 12 months on the gap has widened to 87 per cent, with the 80 per cent LTV product currently at a rate of 3.73 per cent, compared to 1.99 per cent for the 60 per cent LTV product.

Mark Lofthouse, chief executive of Mortgage Brain, said the figures 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 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 home owners to take their first steps on the housing ladder.”

peter.walker@ft.com