Residential  

Highest LTV mortgages 'virtually non-existent'

Highest LTV mortgages 'virtually non-existent'

The number of 95 per cent loan to value mortgage deals, favoured by first time buyers, has fallen month-on-month, according to Moneyfacts.

This is despite other high loan-to-value deals returning to the market, as the number of fixed-rate mortgages at 85 per cent and 90 per cent LTV has gradually risen.

Data from the portal showed there were nine five-year 95 per cent LTV deals available in June, two fewer than in May, while their two-year equivalents fell by five deals to six.

Meanwhile the number of 90 per cent and 85 per cent two-year deals rose by 60 and the five-year deals by 58.

Residential mortgage market analysis

PRODUCT NUMBERS

May-20

Jun-20

Difference

Two-year fixed rate (85% LTV)

87

116

29

Two-year fixed rate (90% LTV)

24

55

31

Two-year fixed rate (95% LTV)

11

6

-5

Five-year fixed rate (85% LTV)

83

116

33

Five-year fixed rate (90% LTV)

26

51

25

Five-year fixed rate (95% LTV)

11

9

-2

Source: Moneyfacts.co.uk. Data correct as at 1st day of the month.

Rachel Springall, finance expert at Moneyfacts, said: “While it is encouraging to see some higher loan-to-value deals return to the market at 85 per cent and 90 per cent loan-to-value, it has so far been slow and steady progress.

"At the same time, borrowers who have only mustered a 5 per cent deposit to get onto the property ladder will find very few fixed rate mortgage deals on the market available to them."

The property market had been closed for seven weeks as a result of the lockdown.

But lenders have reintroduced higher LTV lending as well as physical valuations, following the government’s announcement last month that anyone in England could now return to moving home.

According to Moneyfacts there were 105 fixed-rate two- and five-year deals at 95 per cent LTV in April, compared with 15 deals available today.

Ms Springall said: “It is hoped that the mortgage market will adapt once more to accommodate borrowers with small deposits, but it will not happen overnight”.

A survey of mortgage brokers published last month found the majority believed lending would recover to pre-pandemic levels within nine months.

Chris Sykes, mortgage consultant at Private Finance, warned 95 per cent deals were “virtually non-existent” at present as lender have put strict criteria on them.

Mr Sykes said there were only a “few very specific scenarios” where a 95 per cent mortgage would be available, such as if a parent offered a proportion of the property price in savings as security for the mortgage, being situated close to a specialist building society or buying a shared ownership property.

He added: “Although on paper they are on offer the vast majority of people don’t meet the criteria to get one currently.

"I would also say it is understandably so, with projections of where house prices may be in the future, lenders need to be careful how flexible they are currently both for their own risk and the borrowers.”

Mr Sykes added: “The last thing a bank wants is to create mortgage prisoners in negative equity, it is in nobody’s best interest. We are seeing lenders ease back into the 90 per cent market now, will 95 per cent follow? It remains to be seen”.