Significant fall in mortgage product numbers as COVID-19 hits lenders
09 April 2020
AmTrust Mortgage Loan to Value (LTV) Tracker - Significant fall in mortgage product numbers as COVID-19 hits lenders
- Number of 75% and 95% LTV products drop by close to two-thirds as lenders respond to COVID-19 pandemic.
- Percentage drop in higher LTV products slightly less than for 75% LTV products.
- Product numbers back to end of 2017 levels.
Mortgage insurer, AmTrust’s, latest Mortgage Loan to Value (LTV) Tracker has today revealed a significant drop in the number of products available to borrowers with either 5% or 25% deposits, as lenders react to the COVID-19 pandemic and the UK lockdown.
Over the last 12 months, the trend for product numbers has been upwards, however this latest iteration of the Tracker shows how COVID-19 has resulted in many lenders pulling products right across the board.
The AmTrust LTV survey reviews the number of actual product options available to first-time buyers with either a 5% or 25% deposit based on the price of an average first-time buyer house from UK Finance December 2019 figures, the price of an average house as outlined by the February 2020 Halifax House Price Index, and the price of a house at the starting tier of stamp duty land tax, £300k. Below this amount first-time buyers do not currently need to pay any stamp duty.
In order to do this, AmTrust uses one of the online mortgage search engines which includes deals available to both mortgage advisers and direct-only.
Table 1: Number of products currently available at 75% and 95% LTV at three different house price levels
|
House price |
75% LTV – two-year term/all mortgage deals |
75% LTV – all terms/all mortgage deals |
95% LTV – two-year term/all mortgage deals |
95% LTV – all terms/all mortgage deals |
|
£226,331 (UK Finance – average price of a first-time buyer home December 2019) |
265 products (819) |
648 products (1,767) |
42 products (119) |
111 products (268) |
|
£240,677 (Halifax House Price Index – average UK property price February 2020) |
264 products (808) |
647 products (1,762) |
42 products (119) |
111 products (268) |
|
£300,000 (Stamp Duty Land Tax tier – FTBs pay SDLT over this amount) |
263 products (811) |
634 products (1,774) |
44 products (120) |
122 products (262) |
Source: AmTrust Mortgage & Credit, Money Saving Expert, UK Finance, Bank of England, Halifax
Figures in brackets – product numbers Q4 2019 LTV Tracker results.
Product availability has dropped sharply in recent weeks, with two-thirds of products being withdrawn for those borrowers who have a 25% deposit, while the market has seen a similar fall in product numbers for those with a 5% deposit, albeit slightly less in percentage terms.
AmTrust said it was understandable, given the current environment, that lenders had withdrawn large numbers of products, especially specialist lenders who could not rely upon on deposits in order to fund their activity.
It said it hoped lenders would continue to see the value in risk-mitigation products such as private mortgage insurance which would give lenders – particularly those offering higher-LTV products – greater peace of mind about their ability to deal with any payment issues in the future.
Patrick Bamford, Business Development Director at AmTrust Mortgage & Credit, commented:
“In a very true sense, these product numbers need to be looked at in isolation, because they differ so greatly to the overwhelming trend of the last 12 months, which has seen a concerted increase in product availability.
“Now, we are in a very different environment. The COVID-19 pandemic hit fast, and it’s completely understandable that lenders have had to react quickly, and many hundreds of products have been withdrawn, for borrowers fortunate to have a 25% deposit or those with a 5% deposit.
“The slight saving grace for low-deposit borrowers is that their product choice has not dipped – in percentage terms – by quite the same amount, however we’re still at an early stage and lenders will no doubt continue to react as the days pass and we get a greater understanding of how this crisis will play out.
“However, it’s still important to recognise for both first-time buyers and those seeking to remortgage, that the mortgage market remains open for business, products are still available, and especially where lenders can utilise automated, or desktop, valuations – rather than relying on physical inspections – cases are progressing to offer.
“The lending community has needed to act fast – especially given the overwhelming demand for mortgage payment holidays – but it is testament to its resilience that first-time buyers can still access finance and, where the conditions allow, can still see their cases moving forward.
“The industry should be applauded for this, however we must also recognise that market conditions might well get worse, before they get better.”
Average monthly/annual payments slightly up
The AmTrust Mortgage LTV Tracker also looks at the price differential between those borrowers who can put down a 25% deposit, compared to those with a 5% deposit.
AmTrust has pointed out however that these statistics are taken from a period before the current COVID-19 lockdown was put in place and must therefore be reviewed in this context, with the assumption that significant changes have taken place in more recent weeks.
The differential between the average rates taken by those with 25% deposits, compared to those with 5%, has remained the same at 1.56% as 75% LTV average rates increased to 1.48% and 95% LTV average rates increased to 3.04%.
Those with 5% deposits are still (on average) paying over 51% more each month and year for their mortgages when compared to those who are able to put together a larger deposit.
Those with a 5% deposit continue to pay just over £1k per month on average for their mortgage, while those with a 25% deposit can expect to pay £677. This is the third iteration of the LTV Tracker where the monthly amount for those taking out a 95% LTV mortgage has been above the £1k amount.
AmTrust said that, even with cuts to Bank Base Rate, the assumption must be that rates would continue to edge up, and that lenders would be even more focused on de-risking their mortgage books.
Table 2: Average monthly repayments: 75% LTV mortgages and 95% LTV mortgages*
|
|
75% LTV mortgage |
95% LTV mortgage |
Difference 75%-95% |
|
Deposit |
£56,583 (£55,669) |
£11,317 (£11,134) |
£45,266 (£44,535) |
|
Loan |
£169,748 (£167,007) |
£215,014 (£211,542) |
|
|
Interest rate February 2020 (average) |
1.48% (1.44%) |
3.04% (3%) |
1.56% (1.56%) |
|
Monthly fixed payment (two years) |
£677 (£663) |
£1,024 (£1,003) |
51.3% (51.3%) |
|
Annual payment |
£8,124 (£7,956) |
£12,288 (£12,036) |
51.3% (51.3%) |
Source: AmTrust Mortgage & Credit, Money Saving Expert, UK Finance, Bank of England
Figures in brackets – Q4 2019 LTV Tracker results.
*Based on an average first-time buyer house price of £226,331 (UK Finance – December 2019)
