As lenders respond to the COVID-19 pandemic, the number of 75% and 95% loan-to-value ratio (LTV) products has dropped by close to two-thirds, according to research by AmTrust.
AmTrust’s Mortgage LTV Tracker survey found that over the last 12 months there has been an upward trend for product numbers, but that COVID-19 has resulted in lenders pulling products across the board.
The survey reviews the number of product options available to first-time buyers with either a 5% or 25% deposit based on the price of an average first-time buyer house from UK Finance December 2019 figures.
It also looks at the price of an average house as outlined by the February 2020 Halifax House Price Index, and the price of a house at the starting tier of stamp duty land tax, £300k.
For 75% LTV, two-year term/all mortgage deals, between 263 and 265 products were available, depending on house price.
This is a significant drop from between 808 and 819 in Q4 2019.
At 75% LTV for all terms/all mortgage deals, the number of products ranges from 634 to 648, whereas in Q4 last year the number of available products was between 1,774 and 1,767.
At 95% LTV, for two-year term/all mortgage deals, between 42 and 44 products are currently available, down from 119-120.
Finally, at 95% for all terms/all mortgage deals, between 111 and 122 products are now available, whereas Q4 2019 saw this figure between 262 and 268.
The AmTrust Mortgage LTV Tracker also examined the price differential between those borrowers who can put down a 25% deposit, compared to those with a 5% deposit.
The differential remained the same at 1.56%, as 75% LTV average rates increased to 1.48% and 95% LTV average rates increased to 3.04%.
Those with 5% deposits pay, on average, over 51% more each month and year for their mortgages, equivalent to £1,000 per month, whereas those with a 25% deposit can expect to pay an average of £677.
This is the third iteration of the LTV Tracker where the monthly amount for those taking out a 95% LTV mortgage has been above £1,000.
However, these statistics were taken from before the effects of the current COVID-19 lockdown, and do not reflect the significant changes that are likely to have taken place since.
Patrick Bamford, business development director at AmTrust Mortgage & Credit, said: “In a very true sense, these product numbers need to be looked at in isolation, because they differ so greatly to the overwhelming trend of the last 12 months, which has seen a concerted increase in product availability.
“Now, we are in a very different environment.
“The COVID-19 pandemic hit fast, and it’s completely understandable that lenders have had to react quickly, and many hundreds of products have been withdrawn, for borrowers fortunate to have a 25% deposit or those with a 5% deposit.
“The slight saving grace for low-deposit borrowers is that their product choice has not dipped – in percentage terms – by quite the same amount, however we’re still at an early stage and lenders will no doubt continue to react as the days pass and we get a greater understanding of how this crisis will play out.
“However, it’s still important to recognise for both first-time buyers and those seeking to remortgage, that the mortgage market remains open for business, products are still available, and especially where lenders can utilise automated, or desktop, valuations – rather than relying on physical inspections – cases are progressing to offer.
“The lending community has needed to act fast – especially given the overwhelming demand for mortgage payment holidays – but it is testament to its resilience that first-time buyers can still access finance and, where the conditions allow, can still see their cases moving forward.
“The industry should be applauded for this, however we must also recognise that market conditions might well get worse before they get better.”