First-time Buyer
Help to Buy prompts trebling of 95% LTV products
First-time buyers have seen the number of 95% loan-to value products on the market treble since the launch of the government’s Help to Buy mortgage guarantee scheme.
Ahead of the launch of the second phase of Help to Buy in October there were 43 products available for borrowers with a 5% deposit, research from Genworth has found.
That figure has more than trebled in the last five months with 132 products now available to this high LTV band, a rise of 207%.
Most major banks have launched products using Help to Buy while other lenders such as Yorkshire Building Society have announced high LTV deals of their own.
This increased competition in the market has seen the average rate fall by almost 80bps. The typical 95% product was available with a rate of 5.48% at the end of September 2013 compared with 4.69% at present.
Simon Crone, Genworth vice-president of commercial mortgage insurance Europe, said: “Whether or not borrowers focus on the Help to Buy product range or look beyond it for more options, the scheme’s galvanising effect means there are now far more choices and far better rates at 95% LTV to end their wait for a loan.
Those borrowers seeking a high LTV mortgage are likely to have access to a lower rate if they use providers not taking part in Help to Buy with a typical two-year fix costing 5.19% under the scheme compared to 5.06% for the rest of the market.
“The renewed focus on first time buyers has prompted an overhaul of product options and rates up to 95% LTV,” added Crone. “Help to Buy has alerted the British public to the improving chances of getting a mortgage with a 5% deposit. This interest has clearly spurred lenders to launch products with increasingly attractive price tags.”
“Each lender has a different approach to funding and pricing their products, which is why Help to Buy products do not necessarily offer the best rates.
“More competition clearly encourages better pricing, and the option of using private mortgage insurance guarantees can help even more lenders add to the mix of available products. Some lenders need a greater degree of bespoke cover and flexible terms and conditions, so they can compete at 95% LTV without being limited by the government scheme.”
