The number of 95 per cent loan-to-value products has dwindled amid concerns about house prices following the Brexit referendum, according to Moneyfacts research.
The number of 95 per cent LTV products has fallen by 16 per cent in just five months, the research revealed.
Charlotte Nelson, finance expert at Moneyfacts, said the reduced availability of high LTV deals for first-time buyers is particularly bruising when many hoped predictions of cheaper houses would help them realise their dream sooner.
| A year ago | Six months ago | Highest point |
|
| Aug 15 | Feb 16 | Mar 16 | Aug 16 |
Number of 95 per cent LTV mortgages | 195 | 253 | 270 | 225 |
Source: Moneyfacts.co.uk |
|
| Compiled: 23/8/16 | |
She said: “Unfortunately, a downturn in property prices can have a significant impact on the higher LTV mortgage sector.
“A negative turn in prices effectively depreciates the provider’s resale value of the bricks and mortar, which results in providers reeling in their criteria and paring back their offerings to this section of the market.
“With many uncertainties in the market, providers might be treading carefully and more cautious about what they choose to offer the higher risk borrower, such as high cash incentives and multiple product options.
“It is still unknown what effect the Help to Buy Mortgage Guarantee scheme ending this year will have, but the number of products at 95 per cent LTV is likely to dwindle yet again, providing a further blow to borrowers with small deposits who were getting accustomed to the plethora of choice they had.”
Earlier this week Countrywide predicted house prices would fall by 1 per cent in 2017 amid the economic uncertainty caused by June’s vote to leave the European Union.
Moody’s has also warned of a material correction in asset prices, a house price downturn, or a large decline in consumption following the referendum.
But it is not all bad news for first-time buyers as mortgage rates at 95 per cent LTV have fallen to all-time lows.
For example the average two-year fixed rate at 95 per cent LTV fell from 4.44 per cent to 4.04 per cent today.
This represents a £44.76 a month saving if borrowers took out a mortgage today compared to a year ago.
Despite the fall, there are also 15 per cent more 95 per cent LTV mortgages on the market now than there were this time last year.
Christopher Taylor, director of The London Mortgage Brokers, said: “It is certainly unsurprising that lenders have taken their foot off the gas a bit with high LTV lending following Brexit. Lenders do not want to place themselves at risk.”
emma.hughes@ft.com
