Potential first time buyers are still being blocked from the property market by the lack of high loan to value (LTV)
mortgage deals.
Research from Moneysupermarket.com shows that the number of 90% LTV mortgage products available has fallen by 97% since January 2007, from 3,148 to just 102.
What's even more disturbing for FTBs is the fact that rates on such deals have actually increased during that period, even though the Bank of England slashed the base rate from 5% to 0.5%.
Government has failed FTBs
“In January 2007, the average 90% LTV
mortgage deal was just 1.2% above base, but the average difference now is 5.73%,” says Moneysupermarket mortgage head Louise Cuming.
"The government has failed to get mortgage lenders to open their books to first time buyers.
“A 10% deposit is all most first time buyers can hope to afford, so by pulling 90% LTV deals off the shelf, and increasing rates on the remaining deals, providers are keeping first time buyers out of the market - which simply exacerbates market stagnation.”
"Lenders remain for the most part entirely focused on how large a deposit potential borrowers can provide.
“However, if they were to take a more balanced view and place as much importance on affordability and credit profile, they could offer competitive deals with a higher LTV to those who clearly demonstrate they can and will make the required repayments."
Time to fix
In other news, Moneysupermarket is warning that the cost of
fixed rate mortgages looks set to rise shortly, and homeowners are being advised to lock into a deal as soon as possible.
Provided you own a sizeable chunk of your home already, there are number of attractive fixed rate deals available, thanks largely to the tumbling base rate mentioned earlier.
However, analysts are now expecting this rate to rise as the economy recovers, and this will in turn lead to higher fixed rates.
Bottom of the market
"For a while now many people have been waiting to pounce once we reach the bottom of the mortgage market, it seems that time has come,” says Cuming at Moneysupermarket.
"The rising swap rate means banks will be charging each other that little bit more for credit, and they are unlikely to let consumers continue to enjoy lower rates for long.
“Our data shows this is already affecting two year
fixed rate deals, which have risen slightly over the last six months.”
"Borrowers looking to fix should lock in quickly, before the next tranche of mortgage products come through showing drastically increased rates. Borrowers might also consider fixing for a longer period of time, say up to five years. If the Base Rate climbs back to mid 2008 levels, fixed rate deals might be going up for some time."
