Wider market hit by first-time buyer hurdles

Rising rates

Additionally, average two- and five-year fixed rates at 90 per cent LTV were more than one percentage point higher year on year at the start of month.

As the Halifax House Price Index showed the average house price reaching a record high of £250,457 in October, Rachel Dixon, mortgage adviser at RH Dixon, said she believed many first-time buyers were nervous that they may be paying “over the odds” for a property, along with the fact that interest rates had risen on high LTV products.

Olivia Newman, mortgage consultant at Brooks Macdonald, also said that some lenders’ criteria include restrictions on the term of the loan, leading to higher monthly payments.

Nationwide, for example, is applying a maximum 25 year term for lending above 85 per cent LTV. Last month, the building society said it remained the largest lender “consistently” offering 90 per cent mortgages to first-time buyers.

In a Treasury Committee meeting on November 4, Nikhil Rathi, chief executive of the Financial Conduct Authority, said that banks’ “risk aversion” to very high LTV mortgages was not concerning the regulator.

Mr Rathi said: “We have seen in the market some risk aversion from banks in terms of the very high LTV mortgages because of concerns about where house prices may go once the stamp duty holiday ends.

“At the moment, there is nothing causing us concern. That seems to be legitimate commercial decision-making, given the risks in the market.”

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