The latest UK Mortgage Trends Treasury Report from Moneyfacts reveals the combined choice of higher loan-to-value mortgages (90% and 95% LTV) is at its highest count in 17 years.
Combined, the deals represent 19% of the residential mortgage market overall, with the total choice at an 18-year high. The combination in availability of deals at both 95% and 90% LTV rose to 1,360 options – the highest point since March 2008. The 95% LTV tier accounts for 464 products, with 90% at 896. Product choice overall rose month-on-month to reach 7,062 options, the highest count since October 2007.
Rachel Springall, finance expert at Moneyfacts, said although the growth in choice is positive, affordability issues remain. She commented:
“The Government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive. However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins. Indeed, the average 95% and 90% LTV five-year fixed rates fell by just 0.02% and 0.01% month-on-month.”
Turning to rates, Springall added:
“The margin of falls to the overall average fixed mortgage rates shrunk month-on-month, no doubt due to the unsteadiness of swap rates, with only 0.01% shaven off the average five-year fixed mortgage rate, and just 0.05% off the two-year equivalent (compared to 0.07% and 0.08% respectively a month prior). Longer-term fixed rates are not seeing significant shifts, as over the past 12 months, the average two-year fixed rate has dropped by three times as much as its five-year counterpart (0.60% versus 0.20%).
“Overall, the drop of just 0.04% to the Moneyfacts Average Mortgage Rate during August does not bode well for borrowers who were hoping for a rate war, but it is worth pointing out that economic unrest typically leads to rising swap rates, which forewarn lenders.”
Mary-Lou Press, president of NAEA Propertymark (National Association of Estate Agents), agreed that the choice of low-deposit products on offer is positive, but acknowledged affordability is an ongoing battle. She commented:
“Now that stamp duty has risen across England and Northern Ireland, this is likely making it even more difficult to access better mortgage products due to further financial constraints. It also has the potential to distort the housing market, often stopping people from moving when they want to.”
However, Springall urged first time buyers not to lose hope, pointing out that relaxed rules are leading to pleasant surprises. She explained:
“First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living. However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder. Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”
All the latest Moneyfacts Group data can be seen at Moneyfactsgroup.co.uk
