"Hopefully it creates a flurry of interest from would-be first-time buyers about what might be possible for them, even if they might not be able to access this particular product."
No sooner had talk of ‘99% LTV mortgages’ gone away, than they were back with Yorkshire Building Society/Accord Mortgages unveiling its own variation on this theme, starting with the £5,000 ‘sweet spot’ deposit and a maximum loan size of £500,000.
Of course, this is a very simplistic view of it, and we are yet to see how many first-time buyers who have the necessary £5,000 will be able to turn this into a genuine home-buying opportunity, but it’s clear we have another tangible option to be able to offer those who suffer from the relatively low number of products still available for those with smaller deposits.
I have been talking for a few years now about the obsession lenders seem to have around a ‘magic’ 5% deposit so well done to Yorkshire/Accord for coming up with something new. Another could be to save (and prove) 12 months’ worth of mortgage repayments and use that as a deposit.
What we can also say about Yorkshire/Accord’s 99% LTV mortgage is that – hopefully – it creates a flurry of interest from would-be first-time buyers about what might be possible for them, even if they might not be able to access this particular product.
Indeed, as a number of brokers have already pointed out, there may actually be more suitable product choices for first-timers in today’s marketplace, and the first step on this particular road should be individuals getting in contact with mortgage advisers to determine whether they can make this journey to home ownership.
Interestingly, much has been made of the 1% LTV element, and of course if we have first-time buyers looking at £500,000 properties with a 5% deposit, then that would be the loan-to-value.
However, set against the context of the ‘average’ national house price of, according to Nationwide in March, £261,142, then we are looking at an LTV not much shy of 98% LTV.
Now, of course, this doesn’t sound like a significant amount of deposit – or indeed a big difference between 98% and 99% - but in future years, and when individuals come to remortgage, those extra percentage points of equity could make all the difference in terms of being able to remortgage to a different lender or having to stay put with a PT offer. We should not underestimate what this could mean later down the line.
Talking of the Nationwide house price index, each month I review the product availability for first-time buyers who are able to put together a 5% deposit, which this month would be just over £13k.
In that regard, and in terms of the number of 95% LTV products available, we’ve not seen any change in product numbers over the course of the last month. The number available is still 219, however there has been a slight shift in terms of the types of products that makes up – this month we have 190 fixes (down from 192 in March) and 29 trackers/discounts (up from 27).
Not a great shift it has to be said but still worthy of note. As is the pricing shifts we have also seen over the course of the month.
The mood music around the mortgage market in recent weeks has been much more about slight shifts upwards in pricing, and that is reflected in the ‘best buys’ for first-timers looking for 95% LTV products.
The top five-year fix is now the Northern Ireland-only 4.55% option from the Progressive Building Society, with the Family Building Society offering its 4.89% mortgage, and Skipton its England-only 4.9% product.
In the two-year fixed space, we have a table-topping 5.15% mortgage once again from the Progressive Building Society, again only available in Northern Ireland, with Scottish Building Society offering its Scotland-only 5.29%, Skipton its England-only 5.38%, while Halifax offers its 5.39% option to all regions, although this has gone up in price from last month’s 5.2%.
Finally, there has also been some change in the variable/discount/tracker product space for 95% LTV borrowers. Progressive continues to offer its 5.05% two-year discount, as always the 5.4% lifetime discount from Vernon Building Society remains, but this month the Loughborough Building Society has a 5.1% three-year discount for this borrower cohort.
Overall, therefore we’ve not seen any major shifts, but one senses once we get strong hints of movement in Bank Rate, swap rates will move accordingly, and we could again see some highly-competitive products coming to market mid-year as we did in late 2023/early 2024.
The Monetary Policy Committee meets again in May – which may be too soon for any rate cut – however if inflation does continue to fall, then cut announcement at the June meeting will look ever more likely, and hopefully first-time buyers needing to secure higher LTV mortgages will benefit just as much as other borrowers.
