The withdrawal of mortgage products for buyers with smaller deposits and borrowers with little equity in their existing properties was one unfortunate side effect of the pandemic.
The surge in property market activity following the first lockdown put all parts of the property market under stain, particularly lenders, conveyancers and solicitors.
As activity climbed, lenders began withdrawing products for those looking to borrow 85% or more of their property’s value, known as high loan-to-value (LTV) mortgages, and notched up rates for the products they left on the market. That restricted the flow of new business and enabled the banks to begin clearing a backlog of applications built up during lockdown.
It also meant many hopeful property purchasers, particularly first time buyers, were locked out of the market. Meanwhile, many existing homeowners were facing the possibility of remortgaging at a higher rate.
However, new data published this week indicates a change is underway, and lenders are now reintroducing products for those who need to borrow 85% or more of a property’s value.
The total number of mortgage products available climbed 16% to 2,782 during November, the largest monthly increase in product choice since November 2014, according to financial product data provider Moneyfacts.
There were 52 new products introduced at 85% LTV and 32 options introduced at 90% LTV. Both tiers now have the highest number of mortgage options available since March and June respectively.
That’s encouraging for buyers with smaller deposits and homeowners who are looking to remortgage on 85% of their property or more. However product choice is only part of the picture and the cost of high LTV mortgages continued to edge up in November.
Average two-year fixed rates at 85% LTV increased by 0.05% during the month to sit at 3.17%. At 90%, the average two-year fixed rate mortgage climbed 0.03% to 3.79%. On both counts that’s the highest rates have been since early 2015.
What next?
The reintroduction of products could be the first phase in a wider recovery in high LTV lending. With more products comes more competition among lenders, which should result in lower rates.
However the banks are still very busy and as a result remain reluctant to be the cheapest on the high street. That could be exacerbated in the run up to the end of the stamp duty holiday in March.
In the meantime, we are seeing lenders make tranches of funding available at high LTVs, but often they aren’t available for long. Your best bet is to get in touch to discuss your borrowing requirements and let us help you chart a path through the uncertainty.