First-time buyer mortgage availability hits new low

The availability of mortgages for those with the smallest deposits has continued to get worse over the past month, despite the unexpected resilience of the housing market throughout the coronavirus pandemic.

Exclusive figures provided to Housing Today by personal finance website Moneyfacts.co.uk show that the number of mortgage products available at 95% loan to value has fallen to just eight in December.

This is a reduction in product availability of 98% on the more than 400 mortgages available at the start of the year for those wanting to borrow at 95% loan to value.

This number of available mortgages is down from 12 in November and is the lowest number seen all year.

The news comes as housebuilder Bellway on Friday warned that “the absence of higher loan-to-value lending” was making it difficult to access the housing ladder for those with no more than a 5% deposit.

It also comes amid a hiatus over use of the government’s Help to Buy support for buyers, which is switching to a new version of the scheme from the start of April next year.

The scheme, which provides equity loans worth 20% of the value of a new-build property, is designed specifically to help people to access the housing market who can only afford a 5% deposit.

But, with most housebuilders having taken their last reservations under the existing scheme and not yet re-registered for the new scheme, many are unable to use the Help to Buy funding to support new build sales.

The supply of 95% loan-to-value mortgages dried up in April and May during the spring lockdown, amid fears of double-digit falls in house prices prompted by a covid-induced economic crisis. The collapse in lending in this market prompted Brian Berry, chief executive of the Federation of Master Builders, to describe it as the “death” of 95% loan to value mortgages.

However, the continuing absence of 95% first-time buyer mortgages comes despite the unexpected strength of the market, which has ultimately seen prices rise at the fastest rate in years since the end of the spring lockdown, supported by a stamp duty holiday.

Given this strength, there have been signs of some lenders re-entering the market for high loan-to-value mortgages, but Moneyfacts’ data shows that so far this has been limited to lending at 85% and 90% loan to value.

Halifax, Lloyds Bank, Nationwide, and the TSB have all recently restarted lending at 90% loan to value. The figures show that overall the supply of 90% loan-to-value mortgages, in particular, has nearly tripled since hitting a low of 51 products in October, with 143 products now available.

Even this figure, however, is just a fraction of the 779 products available at the start of March this year.

Rachel Springall, finance expert at Moneyfacts.co.uk, said it was good to see lenders re-enter the higher loan-to-value mortgage market but cautioned that product availability remained “limited compared to the start of 2020”.

She said: “At this point in time is it hard to tell how long these deals will last and whether more will enter the market. Those borrowers looking to take advantage would be wise to get some financial advice to help them find the most appropriate deal, especially if they want to make the stamp duty holiday and are concerned about rising house prices.”