The cost of the average first-time buyer property rises

Michael Lloyd

July 29, 2019

There has been a significant increase in the cost of the average property bought by first-time buyers since Q1, mortgage insurer AmTrust’s latest Mortgage Loan to Value (LTV) Tracker has found.

This results in raised deposit levels, loan amounts, and monthly and annual mortgage costs.

Patrick Bamford, business development director at AmTrust Mortgage & Credit, said: “This iteration of our tracker is particularly interesting as it is, in the main, defined by a significant increase in the average property price paid by first-time buyers.

“UK Finance figures reveal that the average price was well over £200k – for the first time in the history of the Tracker – and that, coupled with an average LTV of 77.8%, means we have seen a big increase in the deposits and loans required, and thus a large increase in monthly and annual mortgage costs.

“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.”

According to the latest UK Finance figures, the average first-time buyer house bought in May this year was over £200,000 at £214,623.

This means those who wanted to put down a 25% deposit needed over £50,000, and those with a 5% deposit had to find over £10,000.

This also meant that 95% LTV borrowers continue to pay close to 50% more for their mortgages than those at the 75% LTV level.

This, at a time, when average mortgage rates continue to fall. In a first for the Tracker, the average 95% LTV mortgage rate dropped below 3% to 2.95%, while the average 75% LTV rate dropped again from 1.68% to 1.65%.

The rate differential continued to narrow, down from 1.35% in Q1 this year to 1.3% now.

On average those with smaller deposits pay £962 per month/£11,544 each year, while those with 25% deposits pay £655 per month/£7,860 per year.

This is also a significant increase on the Q1 results, especially for 95% LTV borrowers who have seen costs rise by over £150 per month and close to £2,000 per year.

Recent trackers have seen a shift upwards in product numbers for 95% LTV borrowers, however this is not the case in this iteration, with less mortgage options for those only putting down a 5% deposit.

After two consecutive trackers where 95% LTV product numbers rose, these fell back this time however there was an increase for all 75% LTV options.

The 2-year product options for 95% LTV borrowers stayed beyond three figures across all three scenarios but were less than last time.

Meanwhile those looking at all mortgage terms and options still have close to 260 products to choose from, however this was again down on the Q1 tracker.

All 75% LTV product options rose especially for those first-time buyers who are considering all terms and all deals, up almost 200 on the last iteration of the Tracker.

Those lucky enough to have 25% to put down, and want a 2-year deal, have well over 700 products to choose from, while those looking at all terms have well over 1,600.

This means there are now over six times as many products for 75% LTV first-time buyer borrowers as there are for their 95% LTV counterparts.

Bamford added: “Interestingly, after a period of product increase in 95% LTV mortgage options, this Tracker sees a discernable drop albeit one which does not take too many products out of the market. Conversely, higher-deposit product choice has grown considerably; there are now close to 200 more products to choose from for those who are fortunate to have a 25% deposit.

“Part of this has to be about the way the mortgage market is shifting towards Bank of Mum and Dad-style options for first-time buyers.

“There are far more products available for those lucky to get access to the ‘Bank…’; indeed we have professed concern that lenders are moving too far in this direction to a point were those who can’t rely on parental or grandparent support are not going to be able to find a mortgage suitable for their smaller deposit situation.

“We believe this needs to be addressed by lenders and we do not wish to see this drop in high LTV products continue, as this severely hampers those first-time buyers who want to purchase but can only secure a small deposit.”

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