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Thriving choice for borrowers with small deposits

Journalist: Tom Dunstan, FTAdviser

ended 14. November 2023

The recent Moneyfacts treasury report found a “thriving choice for borrowers with small deposits” with the number of deals at 95% loan-to-value rising to 254, the highest point since September 2022. Additionally, the number of options at 90% LTV rose month-on-month and stands at its highest count since February 2022.

It was also revealed that product choice overall rose month-on-month, for a fourth consecutive month, to 5,678 options, the highest level of availability in over 15 years. The last time there were more deals available was March 2008 (6,192 products).

What is your reaction to this?

10 responses from the Newspage community

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Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
The growing number of high loan-to-value products available is indicative of the greater risks lenders are having to consider to win market share and to reduce the shortfalls on their lending volume targets. However, more choice does not always solve the problem. Many of the 95% LTV mortgage rates are higher than most first-time buyers are comfortable with or on criteria can afford. So there is still room for growth in this sector of the market
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Justin Moy
Managing Director at EHF Mortgages
The improvement in product numbers just shows how desperate mortgage lenders are to lend money at the moment, but more accurately reflects the improving confidence borrowers are showing, in particular first-time buyers. Assuming property values are realistic, lenders continue to support small deposit lending, many are looking to provide 5-year products to allow for a further dip in prices before recovery at the end of that initial term. Borrowers who have previously rented, and experienced early eviction, value having their own home, for a similar monthly cost, even if a further reduction in prices occurs in the short term.
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Darryl Dhoffer
Founder at The Mortgage Geezer
It is encouraging to see that there are more mortgage deals available to borrowers with small deposits. The 5% deposit interest rate, reminds me of the launch of a NEW TV - clients want one, just priced too high, and consumers waiting for the price to drop.
For the low deposit deals available, it is more difficult for some borrowers to afford a mortgage, which is slowing down that end of the market.
Overall, the findings of the treasury report are positive. However, it is important to remain cautious about the outlook for the housing market, as the recent rising of interest rates still poses a very challenging arena for consumers with low deposits.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Lenders need to get money moving after a year to forget about. It is great to see 95% mortgage deals rising in numbers, clearly demonstrating that lenders see this as an underserved area. With this end of the market getting busier, expect to see a price war ensue, enticing many who have perhaps stalled this year to resurrect their property ambitions.
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Michelle Lawson
Director at Lawson Financial
This is encouraging and shows that products are out there. One of the problems is the scaremongering of mortgage rates and good/bad times to buy. If we haven't learnt anything else in the disastrous last few years, If it works for you for now and you can afford the mortgage and meet criteria, then go for it. The lenders have the confidence in the market to offer the products which is encouraging as if they have any doubts they would withdraw.
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Elliott Culley
Director at Switch Mortgage Finance
An increase in products is always a positive and will help first time buyers be providing more choice. It would be good to see lenders targeting the rates at this LTV as they haven't seen as much attention as lower LTV products.
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Gary Boakes
Director at Verve Financial
This is great news, Lenders are realising that home movers are scared of moving due to the increased rates after having such a long period of low rates, whereas FTB's the rate is not as important as what it costs on a monthly basis and with rents rising, we are still hearing the phrase 'that cheaper than my rent' even with rates of close to 6%. With the market slowing, lenders are going to have to be clever with their criteria, affordability and products and clearly they are looking at the higher LTVs to keep the market moving.
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Malcolm Davidson
Director at UK Moneyman
I think we can take the availability of high loan-to-value mortgage products for granted sometimes - there have been lots of periods in the past when this hasn't been the case, most recently during the first lockdown. Whilst Lenders no longer feel the need to utilise the Government's Mortgage Guarantee scheme, I think the fact it is there does support our sector and I expect to see it extended in the upcoming Autumn Statement.
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Gary Bush
Financial Adviser at MortgageShop.com
The increased level of higher Loan to Value products is good to see however if this is to really help the UK First Time Buyers some more effects of the current mortgage rate war between lenders need to be seen at this level of borrowing. In our opinion, these high LTV products need to see more competitive rates to make a real difference from struggling new homebuyers.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
I think it's fantastic that there are so many options for people to buy with small deposits. It's been hard to get on the property ladder for years now and for many, this is their only option to buy. With the average UK house price at around £260,000 per year and the average UK salary at £35,000 a year even a 10% deposit is almost a whole year's wages when most people are struggling to save 10% of their income per year in the current climate. Lenders have seized this opportunity to make buying a home more achievable, and although there are some concerns around negative equity if prices drop, I think at 90% the buyers are still safe enough but may just need to be sensible with savings in case of a property crash.