Home ownership aspirations are “further out of reach” for many as the number of high LTV mortgage deals available has dramatically declined year-on-year, according to Moneyfacts.
Data from the comparison site shows the number of mortgage deals at 90 to 100 per cent LTV has fallen to 76 this month, from 1,172 in September last year.
Average rates have also risen, with the rate on a two-year fixed mortgage at 90 per cent LTV rising to 3.54 per cent this month, from 2.64 per cent in the same month last year.
Rachel Springall, finance expert at Moneyfacts, said: “As we have seen over the past six months, lenders have pulled many higher LTV deals, with some institutions leaving these sectors entirely, largely because of the high level of demand they are experiencing due to the coronavirus pandemic.
“Until matters settle, there is no clear sign of when these deals will return to the market, and with 1,108 fewer deals available than six months ago at 90 per cent LTV and above, it is clear to see how much choice has reduced for potential first-time buyers.”
FTB numbers at seven-year low
Research from Halifax has found the number of first-time buyers is at its lowest in seven years after falling by almost a third (29 per cent) in the first six month of the year, to 116,843, compared with 164,800 in the same period in 2019.
The number is the lowest since H1 2013, when there were 110,490 first-time buyers in the market.
At the same time property prices for first-time buyers have increased by 69 per cent in the past decade, according to Halifax, with the average price now being £241,025, compared with £142,473 in 2010.
Greater London saw the largest 10-year change, at 98 per cent to £463,536.
But things are looking up, said Tom Martin, mortgages director at Halifax.
He said: “Whilst the number of first-time buyers suffered a sharp fall during lockdown, numbers are beginning to increase as we approach the autumn, with purchases that were paused beginning to move again, and buyers making the most of the government’s stamp duty changes.
“With first-time buyers in London paying almost double what they were a decade ago, yet many regions in Scotland remaining affordable, the challenges facing first-time buyers are clearly significantly influenced by where in the UK they are house hunting.”
The property market was effectively closed after the government announced a lockdown on March 23, until restrictions were eased from mid-May in England.
In July chancellor Rishi Sunak announced a stamp duty cut to “catalyse the housing market and boost confidence”, whereby residential property buyers can save up to £15,000 on stamp duty until March.
However, the prevailing low availability of high LTV mortgages is still a challenge for first-time buyers.
Carl Shave, director at Just Mortgage Brokers, said: "Whilst the stamp duty holiday appears to be giving a very welcome boost to the housing market this has not made too much difference to the stamp duty benefit already enjoyed by first time buyers, and their ability to purchase their first home is being dampened by the heavily reduced number of higher loan to value mortgages.
"Whilst it is understood that lenders need to lend sensibly, the vast limitations of these higher loan to value schemes is having a noticeable impact on first times buyers and it could be argued that by limiting these products it will actually in turn contribute to a demise in the housing market putting borrowers in negative equity that is exactly what lenders are advising they wish to avoid.”
According to Halifax, first-time buyers are putting down “record deposits” averaging £47,059, up by 25 per cent on the average deposit in 2010.
However, deposits as a percentage of the property value continued to fall, from its peak of 27 per cent a decade ago, to 20 per cent today.
Kevin Dunn, director at Furnley House, said: “I believe the low availability of 90 per cent loan to value and even lower 95 per cent products is a problem for first time buyers.
“This could lead to an increase in demand for new build properties for first time buyers as they can then use the Help to Buy Equity Loan scheme and put just 5 per cent down.”
chloe.cheung@ft.com
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