Several lenders withdraw higher loan-to-value mortgages

First-time buyers now have slightly fewer deals to choose from, but no cause for alarm just yet.

In the week after Prime Minister Rishi Sunak’s announcement of a General Election, a handful of lenders withdrew some of their higher loan-to-value (LTV) mortgage products.

The number of deals with a 95% LTV dropped from 329 on 23 May to 326 on 31 May, while the number with a 90% LTV fell from 700 to 696.

While these are only marginal changes, it could indicate that lenders are uncertain about the future of the mortgage market and are exercising some caution until they know more.

“The fact that a few lenders are withdrawing some higher loan-to-value products may raise eyebrows, but we are not seeing a mass exit,” Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, commented.

“The deals that have disappeared last week may well resurface, perhaps when re-pricing activity picks up in the coming weeks,” she added.

Pulling deals

Several building societies withdrew some of their first-time buyer mortgage deals at the end of May, with Vernon Building Society pulling its five-year fixed deals at 90% LTV and 95% LTV, for example.

Principality Building Society, one of the UK’s largest building societies , also took a selection of its two- and five-year fixed deals at 95% LTV off the market, while Saffron Building Society, which operates across the East of England, withdrew a five-year deal at 95% LTV.

This slight drop in the number of first-time buyer mortgage deals isn’t necessarily a cause for concern right now.

“However, should more deals be withdrawn at higher loan-to-values, it may come as disappointing news to those who have a limited deposit, such as first-time buyers,” Springall cautioned.

It's worth noting that there are still more higher loan-to-value deals available than at the start of the year when there were just 251 deals at 95% LTV and 640 at 90% LTV.

Furthermore, there were even fewer of these deals available at the start of June 2023, with only 209 at 95% LTV and 539 at 90% LTV to choose from.

Source: Moneyfactscompare.co.uk

Affordability challenges

Aside from product availability, affordability continues to be a major concern for first-time buyers.

Average rates are higher than they were one year ago, with the average two-year fix at 90% LTV rising from 5.66% at the start of June 2023 to 6.14% at the end of May 2024.

The average five-year fixed rate at this LTV rose from 5.23% to 5.59% in the same period.

Similarly, the average two- and five-year fixed rates at 95% LTV have also risen from 6.06% to 6.18% and 5.43% to 5.70% respectively.

But, despite the challenges in saving a deposit and affording the costs of buying and owning a home, homeownership among young adults has risen to its highest point since 2010, according to recent data from the Institute for Fiscal Studies (IFS).

It found that 39% of 25–34-year-olds owned their own home in 2022-23, up from 32.8% in 2015.

However, this is still significantly lower than the peak in 2000, when 59% of young adults in this age group were homeowners.

“Affordable housing is very much in short supply. There need to be significant changes to turn this around, but borrowers will have to wait and see what might be announced to address this issue after the General Election,” Springall commented.

“In the meantime, any borrower looking for a new deal would be wise to seek independent financial advice to find the best mortgage that suits their circumstances, such as one with a bundle of incentives providing the best overall value for money,” she recommended.

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