Newcastle Intermediaries re-enters high LTV mortgages
The lender last offered high LTV mortgages in March last year, according to a spokesperson.
The lender will offer a two-year fixed product at 95 per cent LTV with 3.8 per cent rate. The product is not subject to product fees and has an early repayment charge of 2 per cent until 30th November 2022 and 1 per cent until 30th November 2023.
A five-year fixed of up to 95 per cent LTV at the same rate is also available. It has no product fee and early repayment charges of five per cent until 30 November 2022, 4 per cent until 30 November 2023, 3 per cent until 30 November 2024, 2 per cent until 30 November 2025 and 1 per cent 30 November 2026
The products have a fee standard valuation and ten per cent annual overpayments. Selected deals have £250 cashback.
Newcastle Building Society’s intermediary mortgages head John Truswell (pictured) said: “As well as first-time buyers, second steppers, home movers and remortgage customers can all benefit from higher LTV products which are currently limited elsewhere in the market.
“This range builds on some of the initiatives we’ve recently announced and provides low-deposit borrowers with even more choice in the market.”
According to Moneyfacts, product choice for mortgage borrowers have reached their highest levels since the start of the pandemic, with 4,243 products available in June. The number of higher LTV deals has grown the most.
The latest product count from Moneyfacts indicated that there were around 525 products at 90 per cent LTV and 207 products at 95 per cent LTV.
UK housing cheaper to rent than buy for the first time since 2014 – Hamptons
The differential is particularly strong in London, and becomes even more intense for first-time buyers at 95 per cent LTV.
The average UK tenant paid £71 a month less by renting, compared to if they were servicing repayments on a 90 per cent LTV mortgage, in May.
The average monthly rental was £1,054, or seven per cent lower than a 90 per cent LTV mortgage repayment at £1,125.
This compared to March 2020, when those who bought on those terms would have been £102 a month better off.
In London, a buyer in March 2020 was spending £123 a month less compared to a renter, but by May of this year the situation had reversed, making it £251 a month cheaper to rent.
At 95 per cent LTV, the difference in favour of renting is stronger compared to at 90 per cent, partly owing to the cost of high LTV loans. At 95 per cent, a buyer would spend £195 a month on average more compared to if they carried on renting.
“The pandemic has reversed a six-year trend which now makes it cheaper to rent than buy. A year ago, lenders were either increasing rates or withdrawing higher LTV mortgages,” said Aneisha Beveridge (pictured), head of research at Hamptons.
“It’s likely the balance will swing back towards buying, but this could be offset by rising house prices,” Beveridge added.
Though rents have risen by 7.1 per cent on average in the UK over the past 12 months — the fastest rate of growth since 2013 when Hamptons began measuring — strong house price growth coupled with the cost of higher LTV mortgages have increased the cost of buying and owning a home.
In all regions it was cheaper to buy than rent back in early 2020, but this trend has been largely reversed. By May of this year, it remained cheaper to buy over rent in only in the North East, North West, Yorkshire & Humber and Scotland.
Record rental price growth was seen in May for the South East at 13 per cent, South West at 11.5 per cent, the Midlands at 5.8 per cent and in Scotland, 8.8 per cent.
The Hamptons Lettings Index uses data from Countrywide Group to track changes to the cost of renting based on 90,000 homes.
First Homes scheme launches with seven lenders signed up
Chorley Building Society, Darlington Building Society, Halifax, Leeds Building Society, Mansfield Building Society, Nationwide Building Society and Newcastle Building Society have confirmed that they will be providing 95 per cent loan-to-value (LTV) mortgages for the scheme.
The scheme aims to help first-time buyers onto the property ladder with a minimum 30 per cent discount on market price on certain new builds. Prices for properties must not exceed than £250,000 outside of London, or £420,000 in Greater London.
This discount will also be passed on with the property sale to future first-time buyers, which the government says will benefit local communities and key workers, who can be prioritised for these homes.
The government scheme is part of plans to deliver one million homes by 2024.
This first batch consists of 12 First Homes on the market today in Bolsover, East Midlands.
Government is aiming to deliver a further 1,500 homes by the autumn and has said at least 10,000 homes a year could be delivered in the years ahead if there is sufficient demand.
The government also today launched a campaign, Own Your Home, which provides resources on options for home ownership including the government-backed schemes available to first-time buyers.
Andy Mason, head of housing development mortgages at Halifax, said: “As the UK’s largest mortgage lender, we are proud to support the First Homes initiative which will help first-time buyers – particularly those in some of the most valued roles in our communities – to get a foot on the housing ladder.”
He added that the scheme could lead to savings on the market price of up to £107,000 outside of London and £180,000 in London. First-time buyers using the scheme could pay £5,350 less on the deposit and save £536 a month on repayments, Mason said.
The saving is based on the differential of buying a property at 70 per cent of market price whilst taking a 95 per cent LTV with a 4 per cent fixed rate on 25 year repayment.
Nationwide’s mortgages director Henry Jordan said: “Deposits and affordability are the two major issues faced by all first-time buyers today, especially key workers who have played a vital role throughout the pandemic.
“This is why we are pleased to support the new First Home pilot, which aims to help them buy their first property.”
Newcastle Building Society’s chief executive Andrew Haigh added: “Home ownership can often feel out of reach for first time buyers – especially those without access to the bank of mum and dad.
“We’re committed to delivering innovative ways to help first-time buyers find affordable and sustainable ways to own their own home. We’re pleased to be one of the first lenders to support the scheme.”
Leeds Building Society’s CEO Richard Fearon said: “We’re pleased to be supporting the First Homes scheme, which aims to help people realise their dreams of owning their own home.
“Supporting schemes like this is a way to reaffirm our support for first-time buyers and other borrowers who are not well served by the wider market.”
Negative equity risk makes lack of high LTVs on new builds ‘no surprise’
In turn, this is affecting the delivery of new homes, Barratt Homes has said. In its last update, the house-builder said buyers needed access to mortgage finance in order for developers to continue increasing housing supply.
However, the difficulties with valuing new builds amid rising property prices has made lenders reluctant to open up to this part of the market.
The government-backed 95 per cent mortgage guarantee scheme does not include new-build properties, nor do many of the 95 per cent LTV products launched independently by lenders.
Iain Sillett, mortgage and protection adviser at Right Mortgage, said there had been “multiple enquiries,” to his firm’s website from people wanting to buy new homes with a five per cent deposit, unaware of the scarcity of available products.
He said this was likely restricting the new-build customer base, as along with changes to the Help to Buy scheme, “a home mover or someone starting over in life who previously owned a property has no prospect of owning a new-build property unless they have a 10 to 15 per cent deposit”.
Sillett added: “Hopefully we will see a change of policy from the lenders and the removal of new build restrictions on these products.”
Darryl Dhoffer, mortgage and protection consultant at The Mortgage Expert, said the last time he checked, there were only a handful of lenders operating at the 95 per cent lending tier with options only opening up slightly at 90 and 85 per cent LTV.
He did understand why lenders would be hesitant towards new-build properties with the market being so active. In many cases, this has led to homes across the board seeing price inflation due to a lack of supply.
He said: “Recent hikes in property prices, for all property types old and new, based on clients looking to beat the stamp duty holidays, has led to a wave of down valuations and new-build properties are following the same trends.
“It’s no coincidence or surprise that lenders are cautious in the high LTV bracket, and availability of products show this.”
He said it was also difficult for lenders to confidently find comparables for new builds when valuing, because the data was not always available. This was making the possibility of down valuations and future negative equity a threat.
Dhoffer suggested that down valuations would continue this quarter until the demand for properties returned to normal along with the ending of the stamp duty holiday.
He added: “We could see a realignment of house pricing from 1 October, which will be between 5 to 8 per cent reductions in some areas nationally.
“Then, we’ll see more products come to market in the high LTV bracket, which in turn will help those clients with smaller deposits.”
The market does appear to be slowly opening up, however, with Newcastle Building Society recently becoming the first lender to offer 95 per cent LTVs on new builds through Deposit Unlock, an insurance-backed scheme established by Gallagher Re.
Other options still available
Dhoffer said: “Until then, Help to Buy and shared ownership still remain viable options for those clients wishing to act now. But the question is; do you buy now with a higher deposit, use one of the schemes with a lower deposit or wait till later in the year when there may be more product choice and lower deposit without a scheme?”
Lilla Dilliway, director at BlueWing Financials, said she had not seen any borrowers who were put off by the fact they could not get a standard mortgage for a new build at 95 per cent LTV. Instead, she noticed buyers with smaller deposits were naturally opting to use schemes to help them afford the usually higher-priced homes because it is often the only way for them to purchase.
“I’m sure that there are people who would like to, and could afford to, buy a new-build property with a five per cent deposit outside a scheme, but we haven’t really come across many of these customers,” she added.
This was also the case for Adam Wells, co-founder of Lloyd Wells Mortgages, who said he was “surprised,” that Barratt Homes had made the link between the construction of new homes and mortgage availability at all.
“The majority of clients we have who are looking to purchase a new build property use the Help to Buy scheme. The ones who do not are lucky enough to have large deposits already,” he added.
TSB brings in high LTV product and increases rates
For the option with a £995 fee, the rate for the 90-95 per cent LTV is 3.79 per cent and it is 3.94 per cent for the fee-free alternative.
The lender is not signed up for the UK government’s mortgage guarantee scheme, which involves the government guaranteeing 95 per cent mortgages for customers with five per cent deposits. As part of the scheme lenders cannot introduce their own 95 per cent mortgages.
Lenders signed up to the scheme include Barclays, HSBC, Lloyds Bank, NatWest and Santander.
The lender has also increased the rates on a number of its first-time buyer and house purchase, remortgage and buy-to-let products by 0.05 per cent.
The changes are effective from today and apply to its two-year fixed rate first-time buyer and house purchase 80-85 per cent LTV which has increased from 2.39 per cent to 2.44 per cent. It is subject to a £995 fee.
The rates for its two-year fixed remortgage at 60-75 per cent LTV with a £1,495 fee has risen from 1.19 per cent to 1.24 per cent, whilst its 75-80 per cent LTW with a £995 fee has increased from 1.89 per cent to 1.94 per cent.
The lender’s rates for its five-year fixed remortgage product up to 60 per cent LTV for both its three-year early repayment charge (ERC) mortgage with no fee has gone from 1.89 to 1.94 per cent, whilst the same product with five-year ERCs has gone from 1.69 per cent to 1.74 per cent.
On the buy-to-let side, the rate for TSB’s two-year fixed house purchase and remortgage up to 60 per cent LTV with no fee is now 1.99 per cent.
For its five-year fixed house purchase and remortgage up to 60 per cent LTV with a £995 fee is now 1.89 per cent.
Nationwide launches lowest 95 per cent LTV fixed rate on market
First-time buyers and home movers are eligible for the five per cent deposit deals but self-employed borrowers will be locked out. Flats and new build properties are excluded.
From Thursday 20 May, two and five-year fixed rates and a two-year tracker are available from 3.49 per cent and will be offered outside the government’s guarantee scheme. By not using the scheme, Henry Jordan, director of mortgages, said Nationwide could offer “improved value”.
Its two-year fixes come with three fee options, 3.49 per cent with a £1,499 fee, 3.69 per cent with a £999 fee and 3.84 per cent no fee.
According to Moneyfacts the 3.49 per cent deal will be the lowest fix on the market. Platform offers the next cheapest deal which is a two-year fixed rate of 3.61 per cent with the same fee.
The same fee options apply to the five-year fixes and tracker deals. The lowest five-year fixed rate on offer from the society is 3.79 per cent. The tracker mortgage prices start at 3.59 per cent.
First-time buyers will get £500 cashback on completion.
Three new deals will be added to the 95 per cent LTV range for existing borrowers.
Nationwide withdrew from 95 per cent lending in mid June 2020 after offering the deals direct to borrowers, excluding the intermediary channel, from March. When it announced it would retreat from 95 per cent LTV, Nationwide said it was due to uncertainty in the housing market. The society said it wanted to make sure borrowers could afford their repayments and avoid the risk of negative equity.
On the society’s re-launch Jordan said: “As the UK’s biggest building society and second largest lender, supporting people into their first home is at the heart of what we do. As one of the leading lenders to first-time buyers, we feel confident returning to the 95 per cent LTV market without the need for the mortgage guarantee scheme.
“By not being part of the scheme, we can provide improved value to our members and this is demonstrated by the market-leading rates we’re announcing today.”
Two-year fixed prices rise on average as high LTVs and confidence returns to market
The average two-year fixed rate deal was priced at 2.57 per cent today, up from 2.06 per cent a year ago on 14 May.
Today’s rate was higher by 0.02 percentage points compared to 14 April last month, when it was 2.55 per cent.
The increase in average pricing on two-year fixed products reflects the return of higher-priced, higher-LTV lending. In May, 112 two-year deals were available at 95 per cent LTV, up from 34 in April.
At 90 per cent LTV, the number was 481 for this month, a rise on 440 in April 2021.
By comparison, product availability at higher LTVs dropped off a cliff last year. At 95 per cent LTV, the market offered 41 products, and at 90 per cent, 100 deals last May.
Eleanor Williams, finance expert at Moneyfacts, said: “Last year, particularly at the high-LTV end of the market, availability dropped dramatically, with the number of deals at 95 per cent LTV falling from 391 on 1 March to 14 on 1 June 2020.
“As the market contracted and higher LTV products evaporated, the average rate on a two-year fixed fell as low as 1.9784 per cent as of 25 June last year — the lowest since Moneyfacts began tracking prices in 2007.
“It has been such an unprecedented period and the mortgage market has coped remarkably resiliently,” Williams added.
“We’re not yet back to the same levels as early March 2020, but those higher LTVs are starting to return and it gives confidence to borrowers, particularly those with smaller deposits,” she said.
Overall, the market has seen seven consecutive months of growing product availability, and with a continued low rate environment, Williams said there was “a continuing sense of optimism.”
Virgin launches mortgage guarantee fixes up to 15 years; TSB adjusts rates
At 95 per cent LTV, there is a five-year fixed with a rate of 3.99 per cent, a 10-year fixed priced at 4.19 per cent and a 15-year fixed priced at 4.39 per cent.
All products have no fee and come with £300 cashback for purchases or £500 for first-time buyers. It offers free valuation and free legals on remortgages.
The products are also portable.
The deals are available on properties with a maximum value of £600,000 and for a maximum term of 30 years. They are eligible on houses, flats and maisonettes.
Virgin warned the products could be withdrawn at a short notice.
The lender also changed criteria on its products at 90 per cent LTV.
The maximum term has increased from 30 to 35 years and the maximum property value has also been lifted from £500,000 to £600,000.
It now also accepts flats and maisonettes but they must be in buildings shorter than four storeys and must not be ex-local authority or Ministry of Defence.
Sarah Green, head of customer acquisition, group mortgages at Virgin Money said: “The mortgage guarantee scheme addresses an important consumer need and Virgin Money’s participation in the scheme demonstrates our commitment to the UK housing market.
“We want to continue to build our support for people’s home ownership ambitions, including those with smaller deposits.”
TSB product changes
TSB has added fee-free two-year fixed first-time buyer and purchase products to its range at 0-85 per cent LTV.
Rates vary from 1.64 per cent at 60 per cent LTV and 2.99 per cent at 80-85 per cent LTV.
It has also introduced two-year fixed, fee-free deals, for remortgages up to 90 per cent LTV including a product priced at 0.99 per cent.
The low rate deal is the 60 per cent LTV remortgage with a £1,495 fee. Otherwise, rates range from 1.69 per cent up to 60 per cent LTV with a £999 fee and 3.64 per cent for a fee-free deal at 85-90 per cent LTV.
Elsewhere, the bank has reduced rates on its two-year fixes across 0-90 per cent LTVs by as much as 15 basis points. Two-year fixed remortgages up to 85 per cent have seen reductions of up to 10 basis points.
Meanwhile, its two and five-year fixed shared equity remortgages have had rates increased by up to 50 basis points.
These are now priced between 1.54 per cent – for the two-year fixed at 60 per cent LTV for the £995 fee-paying product – and 2.39 per cent for the five-year fixed at 60-75 per cent LTV with no fee.
‘He who dares’ mindset can help brokers help first-time buyers – Calder
This might seem ambitious, after a rollercoaster 12 months, but, you know, ‘he who dares Rodney.’
There are no prizes for guessing what I came up with for March and April, but my plan was more cunning than you might imagine.
I thought this would prove a good time to address first-time buyer life beyond the stamp duty deadline. Of course, this deadline was always likely to have some fluidity, due to the sheer volume of property-related transactions over the past six months.
And so it proved. The Budget confirmed many suspicions, but the topic remains valid as we are hopefully looking at a clearer path to a mortgage world which doesn’t revolve around stamp duty.
Granted this is something of a simplistic statement. Stamp duty will remain a necessary calculation for the majority of purchases now and in the future.
However, it’s important for first-time buyers, and those looking to take a step up the property ladder, also to appreciate what other support measures have been available from April onwards.
Mortgage Guarantee Scheme
The mortgage guarantee scheme has seen the government guaranteeing 95 per cent loan-to-value (LTV) mortgages for buyers with five per cent deposits. It has been designed to increase the appetite of mortgage lenders for high LTV lending to creditworthy customers. Under the terms of the scheme, the government will guarantee the portion of the mortgage over 80 per cent.
We are proud to be part of this initiative which we hope will support a new generation in realising their homeownership aspirations.
But it’s not the only available avenue for potential borrowers.
Help to Buy
The new Help to Buy Equity Loan Scheme (2021-2023) will be launched, aimed solely at first-time buyers purchasing a new build property.
As with the previous guise of the scheme, the government will lend homebuyers up to 20 per cent of the cost of a new-build home, with borrowers required to pay a further five per cent. The loan is interest-free for five years. However, under the new scheme, Help to Buy has regional price limits set at 1.5 times the average first-time buyer price in each region of England.
The new Shared Ownership scheme allows buyers to purchase a minimum share of 10 per cent, compared to 25 per cent previously and will permit staircasing, whereby buyers increase the share they own in instalments of one per cent, compared to the current five per cent or 10 per cent.
In addition, a new 10-year period will be introduced for maintenance and repairs, whereby the landlord or housing association will be required to cover costs rather than homeowners.
Brokers are integral
It’s positive to see a range of government-backed options, even if these initiative will not suit the needs of every borrower.
Intermediaries will play an integral role in ensuring that potential borrowers are fully informed about individual schemes, and the pros and cons attached to them.
The value of the advice process will ensure there remains life after the stamp duty deadline for a growing number of first-time buyers, and will remain crucial in delivering the right solutions to meet a host of ever-changing property-related dreams.
HSBC cuts rates up to 95 per cent LTV; The Nottingham and Vida add high LTV deals
This includes its two-year fixed mortgage at 95 per cent LTV with a £999 fee. This has been cut from 3.99 to 3.74 per cent and the fee-free equivalent has been reduced from 4.29 to 3.99 per cent.
The 90 per cent LTV two-year fixed with a £999 is now priced at 2.99 per cent after a 10 bps reduction.
Two and five-year fixed mortgages at 80 per cent LTV have been reduced by 0.10 per cent.
A five-year fixed product at 75 per cent LTV with a £999 has been cut to 1.54 per cent. Meanwhile, at 60 per cent LTV, the five-year fix with a £999 fee has been reduced to 1.24 per cent while the fee-free option has been cut to 1.54 per cent.
The bank continued on its drive to roll out to the whole broker market with the addition of more than 100 firms in the last eight weeks.
HSBC also said it completed more mortgages in March than in any previous month it had offered home loans, including 3,000 mortgages for first-time buyers.
Michelle Andrews, HSBC UK’s head of Buying A Home, said: “It has been an incredibly busy time for us, and we have seen all of this with lockdown measures still in place. I am extremely proud of my teams who are delivering customer-focused service on a daily basis.
“This gives me great hope for HSBC UK providing a greater share of mortgages, and hope and excitement for the mortgage and housing markets post-lockdown.”
The Nottingham returns to 95 per cent LTV lending
The Nottingham has added a 95 per cent LTV product to its range as part of its re-entry into low deposit lending.
The mutual withdrew from the mortgage market completely in September before slowly returning earlier this year, with its most recent launch being 90 per cent LTV mortgages.
The 95 per cent LTV is a five-year fix with a rate of 4.1 per cent. It offers a free valuation and free legals for remortgages.
Nikki Warren-Dean, The Nottingham’s head of intermediary sales, said: “A year on from last lending at 95 per cent LTV we are pleased to have this product available, and hope it appeals to first-time buyers with a lower deposit looking to get on the property ladder.”
Warren-Dean also warned on the product’s availability and cautioned it may pulled at short notice.
She added: “We’re expecting this product to be popular so our message to brokers is to submit well-packaged cases to us as soon as possible.
“No matter who the lender is, product ranges can change at relatively short notice, particularly in the current climate, so we would encourage brokers who have an accepted decision in principle to submit a full application at their earliest convenience.”
Vida launches limited edition mortgages
Vida has released limited edition residential mortgages at 85 per cent LTV.
The mortgages are eligible within its Vida 1 range for borrowers with minor credit impairments.
There’s a two-year fixed set to 4.09 per cent and a five-year fixed priced at 4.24 per cent. The products are available for purchase and remortgage with a maximum loan size of £500,000.
The lender is also launching fee saver products to the Vida 1 range up to 70 per cent LTV, including a two-year fixed with a rate of 3.59 per cent and a five-year fixed at 3.74 per cent.
These mortgages are fee-free and have a £49 assessment fee. The maximum loan sized offered is £350,000 and the lender will carry out a free valuation on properties worth up to £500,000.
Richard Tugwell, director of mortgage distribution at Vida, said: “Although there are reasons for optimism, the Covid-19 pandemic has had a huge impact on the financial circumstances of millions of people across the UK.
“The long-term implications of the crisis mean there is a new generation of borrowers with impaired access to credit who will need the support of specialist lenders to help them despite their complex situations.”
He added: “Our new product launches today are another step in achieving this, and we’re confident that these offerings are a great solution to help borrowers who have smaller deposits or who find that the costs associated with home buying restrict their home ownership plans.”