Rock-bottom rates and jumbo-sized loans, there’s been some exciting trends in the mortgage market over the past year-and-a-half.
According to insurer Genworth, the number of 95 per cent loan-to-value mortgages being issued has recovered an extraordinary amount since the recession. Between August and October 2013, these loans hit a low of 43. However, by April 2014 numbers rocketed up to 150, which is highlighting the increasing confidence of lenders. Not to forget, borrowing costs remain at historic lows and could even persist until 2016.
Looking at the numbers on a yearly basis, the number of five per cent deposit mortgages available to buyers increased by 57 per cent to 182, after coming in at 116 in January 2014. This means that there are now more of these products available to homebuyers than at any other time since the recession.
The launch of the government’s Help to Buy scheme in January 2014 has surely helped. However, latest stats suggest that reliance on the initiative is falling, where it now accounts for only one in three products on the market.
Aspiring first-time-buyers may welcome the news, as raising a deposit of 25 per cent is often not an option for many. But despite the availability of these 95 per cent loan-to-value mortgages, buyers should be wary of the massive interest rates.
Mortgage repayments will be significantly higher for a five per cent deposit loan on a home worth £150,000, when comparing to a 25 per cent deposit mortgage on the same property. Those on the 95 per cent loan will find themselves paying £816 a month, compared to just £477 for the 75 per cent mortgage. The difference in repayments adds up to a bit over £4,000 a year, and this is despite average interest rates on 95 per cent loan-to-value mortgages falling to a post-recession low.
Simon Crone, Genworth vice president, said : “The extra costs add up to a colossal sum for younger households and could leave many feeling the pinch and could make or break their house purchase.”
He added that greater appetite to lend at this rate would allow competitive rates to thrive. However, there needs to be capital relief available beyond 2016 for this to happen, which would require a permanent system of mortgage insurance. He further explained that the private sector would need to be enlisted, this would then transfer the risk from the taxpayer and make the mortgage market fairer - especially for the the first-time-buyer.
Unsecured Personal Loans
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST
Established In 1988. Company Registration Number 2316399. Authorised & Regulated By The Financial Conduct Authority (FCA). Firm Reference Number 302981. Mortgages & Homeowner Secured Loans Are Secured On Your Home
First Choice Finance is a trading style of First Choice Funding Limited of The Old Courtyard, 103 Buxton Road, High Lane, Stockport, Cheshire. SK6 8DX. Copyright protected 2014.