"It is good to see more lenders active in this space, and recognising the high LTV need that exists."
As we move closer to Christmas, not only are we likely to see a pre-holiday season shopping for presents rush but we might also be in the throes of a first-time buyer rush as well.
The latest figures out of Rightmove suggest the Government’s decision to return stamp duty thresholds to their previous levels – meaning first-timers will pay more – from April next year is having an impact in the form of greater activity levels.
This is particularly so in those higher-priced areas of the country such as London, the South East and East of England. According to Rightmove, from April only 8% of homes in London will be stamp duty free, while its 24% in the South East and 32% in the East of England.
The property portal said that, before October’s Budget, first-time buyer demand in London was 28% ahead of last year, now it is 31%. In the East it has gone up from 28% to 32% and in the South East from 23% to 24%.
Another reason why first-timers might think attempting to get on the ladder sooner rather than later is a good idea, comes with the latest raft of house price data.
Nationwide’s latest monthly data for average UK house prices, showed a significant – albeit seasonally adjusted – monthly increase of 1.2%, pushing the annual change up to 3.7%.
This is the fastest increase for two years, since November 2022, and the monthly increase was the largest since March 2022, and Nationwide itself point to there likely being an increase in transactions over the next three/four months as buyers bring forward purchases in order to beat the stamp duty hike.
The increase in prices brings the average UK house price to £268,144 and that is the figure I use to track the number of high LTV products available each month.
Looking specifically at those available to first-time buyers who have a 5% deposit – in this case just over £13,400 – we can see there has been a further, but only slight, drop in the number of 95% LTV mortgages currently available.
Dropping from 250 products in November to 243 this month, it is by no means a sizeable fall, and in fact has stayed relatively stable over the last six months of 2024, which gives me hope that we’ll continue to see engaged lenders in this space during 2025 and going forward.
Clearly, if they are looking at where purchase demand is coming from, they will see a growing number of first-time buyers seeking to get on the ladder, and as mentioned above, the next few months might see a further uptick as more would-be homeowners attempt to ‘beat’ that stamp duty deadline.
Pricing has not shifted too much over the course of the last month, but it is interesting to see the building society sector now leading the way in terms of 95% LTV ‘Best Buys’.
In the five-year fixed rate space, Progressive’s Northern Ireland-only 4.65% mortgage retains top spot. Whereas last month, it was followed by three mainstream banks, now we have three regional building societies – Scottish Building Society’s 4.89% product, the Monmouthshire’s 4.9%, and the Newbury’s 4.99%.
These names also figure prominently in the two-year fixed rate space: 5.14% from the Scottish, 5.2% from Monmouthshire and 5.29% from both Newbury and the Leeds. Again, not a huge shift from last month and, even with a Bank Base Rate (BBR) cut, the rise in swaps has put paid to any notable price shifting.
For discounts and trackers, we have seen the BBR cut passed on though. Progressive has shifted its two-year discount down from 5.14% to 4.89%, Newbury’s three-year discount is down from 5.19% to 4.99%, while the Loughborough continues to offer its 5.15% three-year discount.
While the outlook for rates is a little uncertain, it’s undoubtedly the case that currently those discounts and trackers present good value when pitched against the other best buy fixes. If borrowers feel confident of further cuts, then you would imagine the popularity of these variable products may grow, particularly as they are already priced better than many fixed rate offerings.
The one fly in the ointment is the number available – at the moment there are only 26 trackers/discounts/variable 95% LTV products compared to 217 fixes.
This time last year we had 189 95% LTV products available for first-time buyers so we must be positive that we are close to 30% up on that figure in December 2024. And, at times this year, we have been above that figure, so again it is good to see more lenders active in this space, and recognising the high LTV need that exists.
Let’s hope as we move into a new year that we continue in the same vein. First-timers need affordable high LTV mortgages, lenders can utilise private mortgage insurance where necessary to supply them, and by doing so, we can help more purchasers into their first home.
