The UK mortgage market has seen some changes, particularly for those looking to borrow with a smaller deposit. According to recent data from Moneyfacts, a leading financial product analyst, several high-loan-to-value (LTV) mortgage options have been pulled from the market in the last week of May. However, despite these withdrawals, the variety of available mortgage products remains broader than at the beginning of the year and is higher than the same period last year.
High-LTV Mortgage Trends
High-LTV mortgages are typically targeted at borrowers who can only afford a small deposit on their new home. Over the past week, the number of available fixed mortgage deals at 95% LTV decreased slightly from 329 to 326. Similarly, options at 90% LTV also saw a small decline, falling from 700 to 696.
Specifically, Hanley Economic Building Society withdrew its two-year fix at 95% LTV, and Principality Building Society removed some of its two- and five-year fixes aimed at first-time buyers. Saffron Building Society and Vernon Building Society followed suit, pulling a five-year fix at 90% LTV and some five-year fixes at both 90% and 95% LTV, respectively.
More Options Than Before
Despite these withdrawals, the market is richer in options than earlier this year and even more so than last year. At the start of 2023, there were 251 deals available at 95% LTV and 640 at 90% LTV. Looking back to June of the previous year, there were only 209 and 539 deals available, respectively. This increase highlights a growing market despite recent retractions.
Rate Reductions
Interest rates for these high-LTV mortgages have also seen slight reductions, which is good news for borrowers. As of the end of May, the average rate for a two-year fixed mortgage at 95% LTV was 6.18%, a slight decrease from 6.2% the week before. Similarly, five-year fixed rates at this tier dropped from 5.71% to 5.7%. For mortgages with 90% LTV, the rates fell from 6.16% to 6.14% for two-year fixes and from 5.6% to 5.59% for five-year fixes.
Industry Insights
Rachel Springall, a finance expert from Moneyfactscompare.co.uk, commented on the situation, stating that the withdrawal of some high-LTV products might seem concerning but clarified that there is no “mass exit” at the moment. She noted that the discontinuation of these deals might be temporary and could reappear as the market adjusts prices in the upcoming weeks.
Springall also highlighted the ongoing issue of affordable housing, which remains scarce. Significant changes are necessary to improve this situation, but potential solutions might only be revealed post-general election. In the meantime, Springall advises borrowers to seek independent financial advice to find the best mortgage deals tailored to their specific needs, including those offering the best value for money through various incentives.