Competition spikes for 95% LTV mortgages
Competition for borrowers with a 5% deposit or equity has escalated over the past year, according to the latest Moneyfacts research.
Today, the average two and five-year fixed rate at 95% LTV stands at 3.22% and 3.52% respectively. Compared to last year, the average rate offered on a two-year deal has decreased by 0.19% while rates offered on the five-year equivalent have seen an even more significant drop of 0.26%.
Additionally, there are currently 405 mortgage products available at 95% LTV. This is the highest in any month since May 2019 when there were 413 deals available, which was also the same month the Bank of England’s Prudential Regulation Authority warned over a rise in risky lending practices.
Eleanor Williams, finance expert at Moneyfacts, said: “As our data shows, the market has picked up since the intervention by the PRA last year, with the average 95% LTV two and five-year mortgage rates falling by a notable amount. Indeed, the rates available now are much lower than they were two or even five years ago when the average 95% LTV mortgage was priced at over 5% for both sectors – good news for prospective borrowers.
“This seems to demonstrate that there continues to be competition among lenders in this ever-expanding section of the market. This may in part be due to lenders trying to attract the increasingly young first-time buyers, who they may then be able to keep on their books moving forwards as they remortgage over the years.
“This is further supported by the fact that over the last year, the number of high LTV deals that are available to remortgage customers has increased by 5% in both the two and five-year fixed rate sectors. This alone is great news for those borrowers who have struggled to find a new mortgage deal due to low levels of equity in their home.
“Looking forward, SWAP rates have fallen over the last month, with the two-year SWAP reducing by 0.16% while the five-year SWAP rate has dropped by 0.24% – both now standing at 0.66% as a result. Historically, although falls of this nature are likely to take a few weeks before they might filter through, there is hope that average rates may reduce even further. Therefore, although last year’s economic uncertainty may have put some borrowers off taking out their first mortgage, or indeed tying themselves to a new deal, it seems that lenders are now actively competing to attract these customers, regardless of whether they are a first-time buyer or are looking to remortgage with a low level of equity.”
Source: Financial Reporter