When we talk about the specialist market we tend to be referring to buy-to-let, equity release or bridging and commercial loans, and few might have put first-time buyer products within the same category.
However, when it comes to low-deposit mortgages which are historically favoured by first-timers, there’s a strong argument to be made for claiming these as specialist products.
And were it not for the Help to Buy Scheme largely resuscitating the high loan-to-value (LTV) product market for a couple of years, I suspect we’d be even closer to believing such propositions were firmly within the specialist space.
Just because borrowers are resolutely mainstream does not mean the product offerings are not specialist.
The start of the year appears to be confirming lenders are looking more at their high LTV offerings as specialist and are putting more funding and resources into their delivery.
This is probably because they bring in higher margins which they might have lost from previously specialist sectors.
The big one of course is buy-to-let – especially in the individual landlord space – which has taken a significant hit from regulatory, taxation and political changes.
The demand for products where the landlord borrower purchases in their own name has fallen considerably, and those lenders who relied on high levels of activity have needed to look elsewhere to recoup the margins.
It’s perhaps no surprise then, to see what we might optimistically describe as intense competition in the high LTV market, gathering pace.
As Mortgage Solutions recently outlined, a number of lenders including West Brom BS, Yorkshire Bank, Sainsbury’s and Tesco Bank, have all cut rates for 95% LTV mortgages across both two-year and five-year deals.
Interestingly, there are also some incentives with these deals including no fees, free valuations, cashback, and the like.
This is undoubtedly a step change from over the past six months.
Our most recent LTV Tracker reported a noticeable uptick in product availability at 95% LTV.
Sadly in the great scheme of things, and when compared to what is on offer for first-timers at 75% LTV, this is but a drop in the ocean.
However, it is clearly positive to see lenders viewing the 5% deposit borrower as one that does not just need greater numbers of products, but more competitive rates plus a number of add-ons in order to help them make that leap onto the property ladder.
The buy-to-let market is moving more towards the portfolio landlord and greater limited company purchases.
One wonders if lenders are now able to see that first-timer buyers can help in not just bridging that margin gap, but also providing a significant and sustainable market for them to remain active in for many years to come.
The best customer
Is there a better customer than one which is at the start of their home-owning journey?
The demand has grown and this has resulted in the number of first-timers pushing upwards – latest figures from UK Finance suggested first-time buyers are at their highest for 11 years.
That said, 5% deposits do still seem like a bridge too far for many lenders.
This is despite it potentially being by far the most popular first-time buyer product, and even with these price cuts I’m sure there is an opportunity for more competitive pricing.
Competition is of course the key in this market and it looks like we finally have greater action in this area, which ultimately should allow the market to move further and mean we can get even more low-deposit borrowers into their first homes.