The AmTrust Mortgage Loan to Value Tracker monitored mortgage products offered through advisers and direct-only, revealing that in Q2 product numbers rose for first-time buyers (FTBs) with 25 per cent deposits.
FTBs with 25 per cent deposits could access 759 two-year products in Q2, up from 688 in Q1.
This level of product availability was six times higher than for FTBs with five per cent deposits, who could access 117 two-year deals, down from 130 in Q1. This followed two consecutive quarters when product numbers grew.
The overall number of products available to FTBs was 260 in Q2, fewer than in Q1.
“The mortgage market is shifting towards ‘Bank of Mum & Dad’-style options for first-time buyers. There are far more products available for those lucky enough to have access to that ‘bank’,” said Patrick Bamford, business development director at AmTrust Mortgage & Credit.
“We’re concerned that lenders are moving too far in this direction to a point where those who can’t rely on support from parents or grandparents are not able to find a mortgage suitable for their smaller deposit situation.”
“This needs to be addressed by lenders and we do not wish to see this drop in high loan to value products continue. It severely hampers first-time buyers who can secure only a small deposit,” he added.
Purchases break £200k
The average cost of a first-time property purchase increased to £214,623 — or to more than £200,000 for the first time in the tracker’s history.
The average rate for a 75 per cent LTV first-time mortgage dropped to 1.65 per cent, down from 1.68 per cent. For a 95 per cent LTV mortgage it fell to 2.95 per cent, down from 3.03 per cent.
The rate differential continued to narrow reaching 1.3 per cent in Q2, down from 1.35 per cent in Q1.
However, overall costs rose against Q1. FTBs on a two-year fix with a 25 per cent deposit pay £655 a month, or £7,860 a year, and for those with five per cent deposit it’s £962 a month, or £11,544 a year.
“The price rise coupled with an average LTV of 77.8 per cent, means we have seen a big increase in deposits and loans required, and thus a large increase in monthly and annual mortgage costs,” said Bamford.
“Even in a market where competition is squeezing pricing significantly, the large increase in property price means that any benefit from lower rates is wiped out by the size of the loans that need to be serviced.
“We need a mortgage market that works for all, and there is plenty of opportunity for lenders to be active in the high LTV space and mitigate their risk with products such as private mortgage insurance,” he said.
The tracker sourced data from AmTrust Mortgage & Credit, Money Saving Expert, UK Finance and the Bank of England.