Mortgage lenders are responding to cries of help with the cost of buying a home by offering more loans needing smaller deposits to first time buyers and movers.
The number of high loan-to-value mortgages has gradually increased over the past year,
according to a review by independent financial firm Moneyfacts.
This month, banks and building societies are offering first time buyers and movers 774
mortgages at 85% or more loan-to-value out of 2811 packages.
Of these, 214 are at 90% loan-to-value requiring the buyer to input a 10% deposit.
‘Loan-to-value’ is the maximum percentage of the price of a home the lender will advance as a
mortgage. For example, to buy an average priced home of £168,000, the buyer needs a deposit
of at least £16,800 to clinch a £151,200 mortgage.
Six months ago, in August, lenders offered 599 deals at 85% loan-to-value or more – with 185
at 90% – out of 2438 products.
A year ago, the figures were 444 at 85% loan-to-value or more with 144 at 90% out of 1971
mortgages on the market.
“Higher loan-to-value mortgages are making a steady return to the mortgage market. This will
be welcome news to borrowers with small deposits, particularly first time buyers who have
struggled to find products which meet their needs,” said Louise Holmes, of Moneyfacts.
Although lenders are easing up on lending conditions, the Council of Mortgage Lenders (CML)
latest figures show that the average first time buyer deposit is £31,600.
The CML also states banks and building societies are unlikely to fund more mortgages this
year than in 2010. Lending is expected to be pegged at £135 billion.
Several lenders are offering first time buyers assisted packages, including guarantor
mortgages with parents and shared equity schemes.
Nevertheless, with no extra funding available, one conclusion is lenders are competing with
keen headline rates and features to cherry-pick customers from rivals rather than free up
lending to more new borrowers.
