No deposit, no problem – 95 per cent mortgages bounce back
10 July, 2017
Banks and building societies are offering a record number of mortgages for buyers with small deposits, a report has revealed.
Around 300 95 per cent products were available last month – the highest number seen in any June since the 2008 financial crisis.
In comparison, homebuyers had more than 900 products to choose from in June 2007, but just six in 2009.
The number of 95 per cent loan-to-value (LTV) mortgages has been climbing ever since, and that is good news for first-time buyers. According to a January survey, the average first-time buyer deposit had more than doubled from £15,168 in 2006 to £32,321 in 2016.
In London, the average deposit had jumped from £26,701 to a huge £100,445.
Buyers looking to grab a 95 per cent LTV mortgage will be faced with a higher interest rate and pay significantly more interest over time, but the trade-off might be worth it for those shelling out for rent each month or struggling to save.
And remember, house prices can go up as well as down, so taking on a high LTV mortgage may leave you in negative equity.
Peter Williams, executive director at the Intermediary Mortgage Lenders Association, said: “First-time buyers’ struggles have been highly publicised, with affordability stretched by rising house prices and modest income growth. However, rising levels of mortgage inquiries, applications and completions shows that a significant number of first-time buyers are still both willing and able to get a foot on the property ladder.”