First-time buyers with a 5% deposit have been hit with a double whammy of rising rates and a fall in product availability in the 95% loan-to-value (LTV) range, research from mortgage insurer AmTrust’s has revealed.
This comes at a time when, according to the latest UK Finance figures for August, first-time buyers need an average deposit of well over £56,000 for 75% LTV borrowers and £12,000 for 95% LTV borrowers.
For those with a 25% deposit average interest rates, according to the Bank of England, have continued to fall, with 2-year rates down to 1.56%, compared to an increase for 95% LTV borrowers up from 2.95% to 2.97%.
Patrick Bamford, business development director at AmTrust Mortgage & Credit, said: “At the end of last year, the signs seemed particularly positive for first-time buyers with smaller deposits – average rates were falling and the number of products available to them was on the up.
“Nine months on, that landscape has changed significantly, and not only are we seeing average rates on the increase, but product numbers are falling, and – coupled with a significant increase in the average price paid for a property as outlined by UK Finance – we’re seeing mortgage costs rising significantly.
“Indeed, those with 5% deposits are now paying over £200 more per month than they were just six months ago.
“While larger-deposit borrowers are also paying more due to the average house price increase, their monthly payment increase is far less than their 95% LTV counterparts.
“Plus, they get to choose from a much more competitive market, with more than six times the number of products, plus rates continue to fall for them.
“In many ways, it’s a double-whammy for low-deposit borrowers who appear to have been hit far more by the withdrawal of a number of lenders during the course of 2019 than others. It is still a competitive market but lenders appear not to want to offer high LTV products in the same number and, a falling number of options also means that average rates are on the rise.
“We are now at a point where, for the first time in the history of this Tracker, 95% LTV borrowers can expect to pay over £1k per month for their mortgage – that’s almost 50% more than 75% LTV borrowers.”