Although huge steps forward have been made over recent years, the celebrations of first-time buyers are likely to remain muted
While it is welcome to hear that 60 lenders now include a 95 per cent loan-to-value product within their range, I will forgive potential first-time buyers if they do not take to the streets in such numbers that their celebrations close down the major arteries of the UK’s cities. Clearly, we have come a long way a decade on from when, according to Moneyfacts, just three providers offered 5 per cent deposit loans.
Over the past year, eight more lenders have moved into this high-LTV space and, if one considers the shape of today’s ‘mainstream’ market, it seems highly likely that – by the end of the year – more will have followed.
The simple fact is ‘margin compression’ is taking its toll, especially in a purchase market subdued by external pressures and uncertainty engendered by the ongoing delay to Brexit. Lenders who are perhaps not in the top echelon may have learned that their ability to secure business in lower-LTV markets is going to be difficult. That is why we have seen the greater diversification into higher-LTV, and into other sectors, notably later-life lending, limited company buy-to-let, and the rest.
The current total number of lenders active in the UK – believed to be more than 100 – shows there is further space for more to size up the higher-LTV area. Perhaps not just for new purchasers, and perhaps not just with some sort of family support deemed mandatory, but also for remortgagers and those who may not be fortunate to have a ‘bank of mum and dad’ to draw money from.
There is also a point to be made about having a 95 per cent LTV product and lending to borrowers who only have a 5 per cent deposit. The two things are not necessarily the same. In talking to potential first-timers, we need to point out the truth of the matter: an increased number of lenders does not necessarily mean you will get a mortgage, and while the market for higher-LTV loans has improved, we still have a long way to run yet.
Pad Bamford is business development director at AmTrust Mortgage & Credit