A round up of the 5% deposit mortgage marketplace
More lenders come 95% LTV to the party
The return of high LTV (loan to value) lending has been spread over the last couple of months. Since the government’s announcement to back lenders with deposit guarantees, we have seen a wave of banks and building societies come out with similar mortgage products. Many of the lenders we advise on were not on the government list. It was generally seen as a high street list and therefore it was interesting to see exactly what the challenger or smaller lenders would do to combat this so they have market share. What they did in the end is release their own 95% products, earlier than the government did.
This was great news for all involved as it meant competition would drive rates down. We have already seen a slight reduction in rates from certain banks who released eye watering rates to begin with. As we speak banks such as Skipton, Bank of Ireland & Accord are all offering these high LTV mortgages before any of the high street could release there’s. With rates at the low end currently standing at 3.99%, hopefully with more lenders we will see rates driven down. As you can imagine as it is, these lenders that are currently in the market are swamped with demand. The mortgage guarantee from the government will start to kick in now with the high street banks utilising this to lend. More competition means lower rates which is good for everyone.
What to watch out for when choosing a lender
As per usual, every lender has a different set of circumstances and conditions with their lending. This is all too common in the higher lending bracket. Some lenders will only lend on houses at the 95% level whereas others will accept flats. One bank might only want to lend to first time buyers when another lender will also include home movers. On top of this is the lenders normal lending criteria that has to be met but it’s key to understand that the 5% deposit products have their own mini criteria sections.
One thing that is a relative constant amongst lending in this level is the income multiples. Generally all lenders will multiply your gross annual income by between 3.5x – 5x depending on who you choose. Then committed expenditure such as debts, loans, children, maintenance payments etc are taken off this to come up with a total mortgage figure. At the 95% level the most you are going to get currently is 4.5x and this is pretty standard across the board. You can use that information as a guide going forward as it’s helpful to know what you can afford.
Getting a deal that is right for you
As you can see, the rates are not amazing on the lower deposit side. When you compare this with pre-COVID there was 95% lending at 2.67% available, it’s a very different market. It’ll only continue to change and develop as we come out of this COVID pandemic and lockdown eases. On top of this there are changing stances from lenders on how they view the self employed, furloughed and new job roles.
All in all there is never a more applicable time to get advice on your next purchase or refinancing. With this consistent change in the markets it can be tough to navigate and find the right deal that suits you. Let alone one that the bank will actually lend to you on. Getting whole of market professional advice can really pay dividends in this situation. The research is taken care of for you as well as all of the administration and co-ordination. Contact us today to see what we can do to help you.