Taking that first step onto the housing ladder has always been difficult, but the figures suggest that the landscape may have improved slightly in recent months: not only have wage growth and record low mortgage rates encouraged more would-be buyers to take the plunge, but our latest research shows that high loan-to-value (LTV) mortgage rates have fallen further still!
The figures show that, despite the average two-year fixed rate as a whole remaining unchanged (and therefore still standing at its record low of 2.56%), there's far greater variation when it comes to individual LTVs. In fact, all LTVs above 80% – often the preserve of first-time buyers – fell further this month, with the average rate at 95% LTV posting the greatest reduction of 0.04% to stand at 4.28%.
Other rates at these levels also fell, albeit to a lesser extent (the average 90% and 85% LTV rates both fell by 0.03% to 3.08% and 2.58% respectively, and the average rate at 80% LTV posted the smallest reduction of 0.01% to 2.38%), but it's a different story at the other end of the LTV scale.
In fact, rates at 65% and 70% LTV have started to edge up: the average two-year fixed 65% LTV rate rose by 0.02% this month, now standing at 1.69%, while the average 70% LTV rate posted a 0.01% rise to 2.31%. Rates at all other tiers remained unchanged, which in itself is a rare occurrence in the current market.
Essentially, this suggests that, were it not for such intense competition at the higher end of the LTV scale, average rates as a whole would have risen, bringing the run of continued rate cuts to an end.
Great news for first-time buyers
All of this is great news for first-time buyers (FTBs), because with average rates for low-deposit mortgages continuing to fall, affordability for those borrowers will further improve. Providers seem increasingly willing to lend to new buyers, too, as not only have rates fallen, but the number of suitable mortgages is rising: the number of fixed rate products at 80% LTV and above has risen by 34 this month, which further demonstrates providers' continued desire to compete for high-LTV borrowers.
At one time it would have been difficult – not to mention expensive – for a new buyer to secure a mortgage, but the figures suggest that this is no longer the case, and arguably, much of this has been driven by the launch of the mortgage guarantee element of the Government's Help to Buy scheme.
Since the mortgage guarantee scheme's launch in October 2013, the average rate for a two-year fixed rate 95% LTV mortgage has fallen dramatically, while product availability has risen by over 400%, which shows how much of an impact the scheme has had. Essentially, it made high-LTV lending acceptable again, and competition rose dramatically as a result.
It's widely expected that this pattern will be an ongoing feature of the mortgage market, as demand for high-LTV lending continues to intensify: not only have over 140,000 people signed up for a Help to Buy ISA since its launch in December, but the changes to stamp duty for second homes mean that more suitable properties could come onto the market for first-time buyers, which could in turn lead to more competition for their mortgage business.
This can only be a good thing for the new borrower, as if mortgage rates for suitable deals continue to fall, their monthly repayments could be lower still! To see if you can take advantage, compare the top mortgages for first-time buyers to see how low your repayments could be.
Sam: 13th Jan 2016 11:56:00
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