The cost of first-time buyer houses have risen by £10,000

Michael Lloyd

April 12, 2019

There has been a significant increase in the cost of the average first-time buyer house, by close to £10,000 from December, resulting in raised monthly and annual costs for first-timers taking out average mortgages.

Mortgage insurer AmTrust’s latest Mortgage Loan to Value (LTV) Tracker showed, using UK Finance figures, the average first-time buyer house has changed from under £169,000 to over £177,000. This has led to increased monthly and annual costs for borrowers who can put down either a 5% or 25% deposit.

Patrick Bamford, business development director at AmTrust Mortgage & Credit, said: “We’re seeing the amount first-time buyers are paying for homes has risen.

“Even though the rate for 75% and 95% LTV mortgages has dropped we’ve seen an increase in the monthly cost for them at those levels. And if you look at the data on Help to Buy, first-time buyers are spending more on homes using the scheme than without.

“In the near future there are a number of important decisions to be made by the government and the regulators around the provision of high LTV loans and we believe that a growth in private mortgage insurance can help sustain and grow the number of products available to those who are unable to rely upon the Bank of Mum & Dad to help them onto the property ladder.”

The monthly mortgage cost disparity for average first-time buyers seeking averagely-priced homes continues to be high, with 95% LTV borrowers continuing to pay close to 50% more for their mortgages than those at the 75% LTV level.

And this with average mortgage rates continuing to fall – for a 95% LTV mortgage, rates dropped from 3.23% in Q4 last year to 3.03%, while there was also a drop in average rates for 75% LTV borrowers, with a quarterly fall from 1.75% to 1.68%

The rate differential between 75% and 95% LTV loans has therefore continued to narrow, down to 1.35% from 1.49% in Q3 last year.

Those with smaller deposits pay on average £801 per month/£9,612 each year, while those with 25% deposits pay on average £543 per month/£6,516 per year.

It comes after a period when costs repeatedly fell for both 75% and 95% LTV first-time buyers.

AmTrust said that increased competition in the mortgage market continues to drive average rates lower, especially with lenders seeking to secure greater levels of first-timer buyer business.

For the second year in a row AmTrust has found while the number of 75% LTV products has fallen quite significantly this quarter, there has been an increase in 95% LTV products.

The 2-year product options for 95% LTV comfortably move beyond three figures across all three scenarios, while those looking at all mortgage terms and options, have more than 260 products to choose from.

While all 75% LTV product options have however fallen by close to 10%, borrowers lucky enough to have a 25% deposit still have over 600 two-year product options to choose from and over 1,450 options when deciding between all-terms/all mortgages.

This means 75% LTV borrowers can still access over five times as many mortgage products as their 95% LTV counterparts.

AmTrust said that the significant dip in 75% LTV options could be a result of a number of lenders closing for new business since the start of the year.

Meanwhile it said the increase in 95% LTV products might be down to lenders feeling the need to go further up a perceived risk curve in order to secure business in what is a still highly-competitive marketplace.

Bamford added: “The fall in 75% LTV product options might also be partly down to the recent announcements by a number of lenders that they are now closed for new business, although with only a handful of lenders doing this, you would not think this would amount for the nearly 10% reduction we have seen.

“It’s far more likely that we are seeing lenders continuing their search for greater margin levels which means they are now far more willing to look beyond ‘normal’ parameters and to improve their offering for high LTV borrowers.

“The product number differential is still a chasm but it is always positive to see those with 5% deposits having a greater number of products to choose from.”

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