Widening gap between 95% and 75% LTV mortgage rates

Average rates for borrowers seeking high LTV mortgages, those above 95% LTV, have increased to 3%, according to the latest data from AmTrust’s Mortgage Loan to Value (LTV) Tracker.

The mortgage insurer revealed the number of products available to this group increased across all categories, although rates for their 75% LTV counterparts had continued to fall.

AmTrust said the differential between the average rates taken by those with 25% deposits – compared to those with a 5% deposit – had widened further to 1.56%. The data showed that 75% LTV average rates dropped to 1.44%, with 95% LTV average rates rising to 3%.

AmTrust Mortgage & Credit business development director, Patrick Bamford, commented: “There has been a slight upturn in terms of product choice for 95% LTV borrowers in this latest version of our LTV Tracker with, for the first time in two quarters, an increase in product choice for those with a 5% deposit.

“This adds to the other positive news which is a slight drop in the average deposit required by high LTV borrowers and a corresponding fall in the average amount payable each month, but these are only very marginally, and unlikely to make a major difference to those seeking to get on the housing ladder.

“The more worrying trend remains an increase in average rates for 95% LTV borrowers and an increase in the rate differential between these first-timers and those with a 25% deposit. We still see the latter group paying 50% less each month in mortgage payments than high LTV borrowers, and this is a trend that shows no sign of changing.

“It means that any potential first-timer who wants to get anywhere near the most competitive rates in the market, needs a significant deposit to do so.”

The theme of average rates rising for those seeking 95% LTV mortgages had continued throughout the tail-end of 2019 according to the latest data, although with a greater degree of political certainty, AmTrust anticipated that more lenders might begin adjusting their rates in the new year.

The data showed that borrowers with a 5% deposit will pay just over £1,000 per month on average for their mortgage, while those with a 25% deposit can expect to pay £663.

“At current levels, that means having to save over £55,000 or be lucky enough to have the ‘Bank of Mum & Dad’ to call upon,” Bamford added. “Given this situation, it is perhaps not surprising that the number of mortgages available to those in such a fortunate situation continues to grow.

“We are however in danger of creating a mortgage market which can only be accessed by those with family support and this is likely to mean significant numbers of potentially credit-worthy borrowers not being able to become homeowners.

“With a new Government in place, the market will be watching March’s Budget very closely to see if there is any further support to be provided to first-timers.”

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