The latest findings from the quarterly AmTrust Mortgage Loan to Value (LTV) Tracker showed that average interest rates have increased significantly for those with both a 5% or 25% deposit.
The AmTrust survey, which tracks data from UK Finance, the Treasury and Bank of England, shows lenders appear to have already priced in a potential Bank of England rate rise in august.
Average fixed-rates for 95% LTV mortgages have increased throughout this year to 3.95%.
And average rates for 75% LTV mortgages also increased to 1.74%.
This means first-time buyers with a 25% deposit will pay on average £20 more each compared to those with just a 5% deposit who will pay £22 more.
AmTrust’s research reveals that the average loan required by first-time buyers has also gone up again since the last quarterly tracker in April – up to £125,397 for those with a 25% deposit, and £158,836 for those with a 5% deposit.
Product numbers fluctuate
The government’s focus on supporting the first-time buyer market has led to an increased interest in the sector, not just from mainstream lenders but also challenger banks and specialist operators, according to AmTrust.
This has led to the number of product options available to first-time buyers within the last quarter seeing a rise at both 75% and 95% LTV levels, and across both two-year and all product-type options.
Those lucky enough to be able to review 75% LTV options, have access to hundreds if not thousands of products – dependent on type and term – while the options for 5% deposit borrowers have also shown an increase, although the choice is unlikely to stray into the hundreds if they want a two-year term, the data showed.
Lenders continue to aim the vast majority of their first-time buyer product range at borrowers who are able to put down significant deposits on their property.
Coupled with the greater costs for 5% deposit borrowers, AmTrust is concerned that only those individuals who can access the Bank of Mum & Dad are able to get on the housing ladder.
Pad Bamford, business development director at AmTrust Mortgage & Credit, commented: “With a far greater level of product availability for first-timers added into the mix, and the fact no stamp duty is payable on homes valued at £300k or less, then you could say that prospective new purchasers are in as strong a position as they have been for some time.
“But the major obstacle to overcome for most first-timers is still securing the deposit. Even at the 5% level, the average first-time buyer purchasing the average first-time home is still going to need in the region of £9k before they even consider whether such deals are affordable to them.
“Those who want to access the very best rates at the 25% deposit level, and save themselves over two-thirds each month on their mortgage payment, have an even greater challenge on their hands and would need to find over £40k.
“It is perhaps no wonder that we have real concerns around the ability of would-be homeowners to save this type of money; indeed without the help of family and friends it might seem like an impossible job.”