Market sees strongest supply of 95% LTV mortgages in nearly 18 years
First-time buyers with small deposits are seeing a wider range of mortgage products, as price comparison site Moneyfacts reports a notable rise in choice at higher loan-to-value (LTV) tiers, alongside a modest uptick in fixed mortgage rates and a longer average shelf-life for new deals.
According to the latest UK Mortgage Trends Treasury Report, availability at higher LTV bands increased in January. Options at 90% LTV have reached a record high since Moneyfacts began electronically tracking LTV ranges in July 2007, while 95% LTV products are now at their most numerous since March 2008. This broadens the market for first-time buyers and homeowners with limited equity looking to refinance.
Across the residential market, overall product numbers rose month on month to 7,537, more than 1,000 higher than a year earlier. Greater choice coincided with a lengthening in the average time a mortgage stays on the market, with shelf-life extending to 33 days, in line with the usual slowdown in activity at the start of the year.
Fixed pricing has started to move up after several months of reductions. The average two-year fix increased by 0.02 percentage points in the month to 4.85%, while the typical five-year fix rose by 0.03 percentage points to 4.94%.
Cuts to the Bank of England base rate have fed through to variable pricing. The average two-year tracker rate dropped from 4.44% to 4.41% over the month and is now 1.05 percentage points below its level of 5.46% a year ago.
At the same time, the average standard variable rate (SVR) has fallen to 7.15%, down from 7.78% on the year, though still well below its recent peak of 8.19% recorded in November and December 2023.
For remortgage clients, Moneyfacts noted that the incentive to move away from an SVR has strengthened, with typical fixed rates sitting well beneath the average revert-to rate. However, the organisation cautioned that borrowers exiting low fixed rates secured several years ago, particularly in 2021 when typical pricing was around two percentage points lower, may still face higher monthly payments.
“This year is setting itself up to be a fruitful one for first-time buyers, and really, they need all the help they can get amid the lack of affordable housing,” said Rachel Springall (pictured right), finance expert at Moneyfacts.
“Despite the volatility in mortgage rates over recent weeks, and a typical seasonal slowdown in activity that resulted in a rise to the average shelf-life of a deal to 33 days, the latest boost to product choice and sentiment towards relaxing stress tests will be encouraging news to borrowers.
“Mortgages at the 90% loan-to-value (LTV) tier now represent a 13% proportion of the residential mortgage market, with 95% LTV deals representing a small fraction of just 7%. The number of options in both of these sectors rose month-on-month, which has led to a record-high count in the number of deals available to borrowers with a 10% deposit or equity.”
Aside from increased high-LTV options for borrowers, Springall noted that there were some noteworthy changes in loan-to-income ratios over recent months, which would further boost the chances for new buyers to secure a deal.
“One example is Nationwide, which now lends up to six times income to remortgage customers or those moving home, up to 95% LTV,” she said. “Lenders have been urged to do more to support first-time buyers to boost UK growth, so any improvement should be welcomed.
“However, seeking advice before entering any arrangement is essential. Hopefully, there will be ongoing improvement to mortgages, as a ‘Roadmap’ review into lending by the Financial Conduct Authority is set to take centre stage this year.”
For advisers and intermediaries, the combination of wider high LTV availability, evolving stress-testing approaches and recent changes to loan-to-income limits from major lenders may widen the pool of potential first-time buyers and home movers who can secure finance. At the same time, brokers are likely to field more complex affordability discussions from existing borrowers facing payment shocks as they leave older, cheaper fixed-rate deals.
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