High street lenders return to 90% LTV
There have been concerns for some time that first-time buyers aren’t being properly catered for by the mortgage market, as lenders rolled back their low deposit options after the shock of the pandemic last year.
The stamp duty holiday also did more to help homemovers and investors than first-time buyers, who pay less stamp duty already, meaning first-time buyers have taken a smaller percentage of the market in recent months.
However, it seems there’s renewed appetite for this type of borrower.
Most lenders that offer 90% LTV have both 2 and 5-year fixed rate options on the table, which is very standard in the UK.
Leeds Building Society is offering a 2-year fix at 3.44% and a 5-year fix at 3.50% with a £999 fee. Products are for purchase and remortgage.
HSBC’s 90% LTV 2-year fix cost 3.69% with a £999 fee, or 3.99% with no fee. Meanwhile it’s 5-year fixed is priced at 3.84% with a £999 fee. There is also a 2-year tracker at 3.79% with a £999 fee – so there are plenty of options.
Halifax was a big player to rejoin the 90% LTV market in December, though its products are for first-time buyers-only. The Coventry’s products are available to first-time buyers, homemovers and remortagors alike.
The list is growing by the day.
More products – but still a long way to go
Moneyfacts data shows that the number of fixed and variable rate products above 90% LTV has almost doubled from 88 in December to 160 in January.
However, this is still a long way from the 779 mortgages in this category in March 2020, before the pandemic took hold in the UK.
Rates are nowhere near as low as they were, likely as a result of less competition.
In January the typical rate for a 2-year fix above 90% LTV was 3.65%, down from 2.57% in March.
It’s the same story in the 5-year fixed category, where the typical rate is 3.79% in January compared to 2.91% in March last year.
With this in mind, we hope more lenders compete in the 90% LTV space to drive mortgage rates down in the months ahead.
It’s really positive news that more lenders are returning to this space.
The current Help to Buy scheme is due to end in March, which will be replaced by one with regional price caps that's exclusive to first-time buyers.
Therefore it’s more imperative than ever that people with a small deposit have options to get on the housing ladder.
While the market has been trying to cope with heightened interest from homemovers and investors due to the stamp duty holiday, once the deadline passes at the end of March the market is likely to be quieter.
That should be the ideal environment for first-time buyers – lenders are going to be clamouring for their business, which could result in more competition and therefore lower rates.