The data from credit insurer AmTrust also appears to show an improvement in general for first-time buyers (FTBs) looking to purchase with small deposits – however they still pay more than those with larger deposits.
And overall the insurer echoed many views that the cut in stamp duty for first-time buyers will simply increase house prices and mean these borrowers will face bigger deposits and more expensive mortgages.
According to the AmTrust Mortgage LTV Tracker, interest rates for 95% LTV deals fell below 4% despite the November Bank of England rate rise as lenders cut these rates.
However, those looking for a deal in the 75% LTV market saw almost the full force of the rate increase.
Bigger deposits needed
AmTrust suggested lenders might be keeping rates for low-deposit borrowers down in order to benefit from any greater interest in purchasing from FTBs as a result of stamp duty cuts.
Product availability in this sector also improved, particularly for those buying around the average house price for first-time buyers.
But despite this slight convergence in average rates, high LTV first-time buyers will still pay 68.3% more than those FTBs with bigger deposits – £5,976 per year compared to £9,816 – to buy an average valued property.
Encouragingly, FTB loans for properties priced at £163,813 have grown significantly – up from just one product to 66 for two-year deals, and from six to 164 for those willing to look at a range of terms.
However, there has been a big drop in availability for those wanting larger loans with smaller deposits.
And overall product choice for those wanting 95% LTV loans is still ‘incredibly’ small across the board compared to those first-time buyers who are able to find a 25% deposit, said the firm.
Greater first-time buyer activity
AmTrust Mortgage & Credit business development director Pad Bamford noted that while in terms of product choice, the mortgages first-timers are most likely to need – high LTV ones – were still nowhere near the level hoped for.
“The latest figures from UK Finance on first-time buyer activity throughout 2017 appear to show further growth, with the anticipation that there will be more first-timers purchasing than home movers in 2018,” he said.
“However, potential first-time buyers with small deposits are hamstrung in today’s mortgage market.
“Compared to those with 25% deposits, these borrowers are undoubtedly the poor relations and we really need to see some joined-up thinking in the year ahead in order to ensure ongoing Government measures – designed to improve the lot of the average first-time buyer – are not scuppered by poor product availability,” Bamford added.
