Soaring number of low deposit mortgage deals
NEW FIGURES released this morning suggest that the number of products for the highest loan-to-value (LTV) mortgages has tripled since the surprise launch of the second phase of Help to Buy in October.
The number of products available for buyers with only a five per cent deposit has soared from 43 to 132 in less than half a year, according to mortgage insurance specialists Genworth.
The number of products for lower LTV ratios have increased by 10 per cent at most, showing how dramatically the number of different options available to new Help to Buy users has ballooned.
The first phase of the Help to Buy policy meant that buyers could offer a five per cent deposit on a home and the government would contribute a 20 per cent equity loan.
However, the scheme only applied to newly-built homes. The second phase, which was originally meant to be launched in January but was pushed forwards to October last year, can apply to any residential property worth less than £600,000.
Genworth also suggests that increased competition for such large mortgages is driving down rates for high LTV products, making it not only the fastest growing part of the market, but the one that is most rapidly becoming better value.
The firms says the best two-year fixed rate 95 per cent LTV mortgage has dropped by 0.79 percentage points since September, while the best 75 per cent LTV option has fallen by only 0.5 percentage points.
“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,” said Simon Crone of Genworth. “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.”
Despite Help to Buy’s effect on the high LTV end of the market, Genworth add that the average first time buyer forked out a 20 per cent deposit during 2013, little changed from 2011 or 2012. By comparison, 17 years ago the average deposit was much lower, at only five per cent.