There are currently five 95 per cent LTV products available but these all come with criteria caveats and are what we would safely now deem to be specialist mortgages requiring either parental or guarantor support to access.
However, 90 per cent LTV product numbers have risen, and according to Moneyfacts in January product numbers were up by 88 to 248 products, which in itself is a 386 per cent increase since October last year.
That’s clearly a positive but it is still nowhere near the levels we saw pre-pandemic and specifically during 2019, when in many months there were over 700 products available at this level, plus there was a much healthier market at 95 per cent LTV.
Many priced out
Product numbers do not make a market, and while it helps to have more options at high LTV levels, there is still a mountain to climb for many people in securing a 10 per cent deposit and meeting the affordability criteria to get a mortgage.
Research from Benham and Reeves suggests affordability is at its worst level in a decade.
It gets to this figure by looking at the average house price to income ratio; currently the average house price in the UK is £250,000, and the average net salary is just over £25,000, which means house price to income affordability is 9.94.
In other words, the average house costs nearly 10 times the average salary, and it would take an entire year saving every single penny of that salary to make the 10 per cent deposit required to even think of getting a mortgage.
Given this will be impossible for almost everyone, realistically individuals would need to put away 20 per cent of their salary every year to have the deposit required in five years.
And who knows what house prices might be in five years’ time.
Lenders remain cautious
It is perhaps understandable why many potential homeowners are crying out for more options at 95 per cent LTV and why we need far more products which do not require help from families.
And you often wonder why we need to make five per cent jumps, given there is nothing to stop lenders inching up the LTV curve?
Understandably, after the year that has passed, there will be an air of caution from lenders however there is clearly a competitive market to be accessed here.
By utilising private insurance to de-risk, this can give an opportunity to offer products at the higher range, with rates not beyond the pale, and the ability to secure a healthy margin.
Even with the recent slight drops in house prices, the market is beyond the range of many – particularly first-timers.
This will not change in any real way unless lenders can see a way to returning to higher LTV product options.
The opportunity is there for quality high LTV business; it’s been done for a generation and it’s badly needed by this new one to get on the ladder.