With HSBC announcing their return to the 90% Loan-to-value arena on the 12th January 2021, it highlights a positive trend. The bank is one in a string of larger lenders to return, opening the market up to 1st time buyers again and potentially encouraging more smaller lenders to follow suit.
Loan-to-value, or LTV is all about how much your mortgage borrowing is in relation to how much your property is worth. It’s a percentage figure that reflects the proportion of your property that is mortgaged, and the amount that is yours.
The number of 90% LTV products on the market has nearly doubled since last July, analysis from Moneyfacts shows. The data, which is due to be published in the Moneyfacts UK Mortgage Trends Treasury Report, found that the number of mortgage deals at a 90% LTV (which requires a 10% deposit) has increased from 88 on 1 December 2020 to 160 on 1 January 2021. In addition to this, the average rates on both two and five year fixed rate deals at a 90% LTV have fallen month-on-month. The average two year fixed rate at 90% LTV has fallen by 0.14%, down from 3.79% on 1 December 2020 to 3.65% 1 January 2021, and the average five year fixed rate at 90% LTV has fallen by 0.13%, from 3.92% to 3.79% month-on-month during the same time period.
While choice has improved, rates are higher than in July 2020.
Moneyfacts finance expert Eleanor Williams says: “Not only is the increase in product choice a positive for borrowers, but it seems that a measure of competition may have started to return to some sectors as well.”
In recent months, lenders have been dipping in and out of the market, offering 90% LTV deals for only short periods. To now have products that will be available for longer periods will help meet the demand for these 90% LTV products and will provide more choice and certainty.
Henry Knight, Managing Director from Springtide Capital commented:
“With a variety of lenders and products returning to the higher LTV space, hopefully it brings a little bit of welcome normality and brings opportunities for those borrowers with a low deposit. Availability of high LTV mortgages, which typically only require a 10% deposit or less, help first time buyers become the next generation of homeowners.”
Those hoping to buy a property with a 10% deposit face limited choice and higher costs than they did before the pandemic, but with vaccines now available, everybody is hoping for a return to pre pandemic figures soon.
Major lenders such as Nationwide are also beginning to make rate cuts, and others are following creating a more competitive market. Now there is a Brexit deal agreed, house price rises and the roll out of the COVID-19 vaccines has begun, this should continue to give lenders more confidence to bring wider ranges of products to the market.
Borrowers requiring a mortgage to cover 95% of the purchase price have faced an even more challenging 2020, and they may have to wait a while for things to improve, with lenders only recently returning to 10% deposits and the current economic climate remaining uncertain.
With new products becoming available all the time, speak to one of our advisers today to discover the right option for you.
To speak to us today, call Springtide Capital on 020 3040 4400