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Drop in number of first-time buyer deals

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Written by: Christina Hoghton
23/08/2016
The number of low-deposit mortgages - often required by those buying their first home - has dwindled

The number of deals available up to 95% of a property’s value has dropped by 16% in the last five months, according to Moneyfacts.

These deals are often taken by first-time buyers, who struggle to save a larger deposit for their first home.

In March there were 270 low-deposit deals available, but only 225 are available today, according to the financial information provider.

Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “It’s disappointing news for first-time buyers that the number of 95% LTV products has fallen by 16% in just five months. It is particularly bruising when many hope that the predictions of cheaper houses would help them realise their dream sooner than expected.

“Unfortunately, a downturn in property prices can have a significant impact on the higher LTV mortgage sector. A negative turn in prices effectively depreciates the provider’s resale value of the bricks and mortar, which results in providers reeling in their criteria and paring back their offerings to this section of the market. With many uncertainties in the market, providers might be treading carefully and more cautious about what they choose to offer the higher risk borrower, such as high cash incentives and multiple product options.”

Good news

It’s not all bad news for first-time buyers. Mortgage rates at 95% LTV have fallen to all-time lows. For example, the average two-year fixed rate at 95% LTV has fallen from 4.44% to 4.04% today.

And there are still more first-time buyer friendly deals on offer than a year ago, when only 195 95% products existed.

Nelson added: “Whilst it may feel that the odds are stacked against the first-time buyer, the 95% LTV market has seen a marked improvement from even a few years ago. So borrowers should take advantage of the deals available now, to avoid perhaps being disappointed in the future.”

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