First-time buyers spoilt for choice

Just 43 95% loan to value products were available when Help to Buy launched in October 2013, yet that number has now grown to 132.

This is the only range which has grown in the first two months of 2014, as product numbers have fallen at 75%, 80%, 85% and 90% loan to value.

Simon Crone, Genworth vice president of Commercial Mortgage Insurance Europe, said: “The combination of commercial appetite, government support and private insurance take-up has transformed the outlook for first time buyers and reignited competition for low deposit mortgages.

“Just six months ago, a 5% deposit left potential buyers stranded with very few options to choose from. But a tide of new products has brought confidence flooding back and has already had a visible impact on the number of loans approved.

“High LTV lending is good for the economy and with improved funding markets and government support it can become a powerful tonic to support the wider recovery.”

Product numbers at 95% loan to value fell by 39% in the first nine months of 2013, leaving 28 fewer options for anyone with a 5% deposit.

The available 95% choices increased by 20% since December, yet they still sit below 2007 levels.

Crone added: “It will clearly take time to get back to a situation where first time buyers are fully supported to obtain a mortgage.

“Help to Buy 2 is undoubtedly helping the effort, but it will be gone after 2016, leaving a clear role for private alternatives to avoid another downward spiral and boost the prospects of future generations.

“Commercial guarantees limit reliance on the taxpayer and will help banks and building societies to lend safely and responsibly at 95% LTV, so buyers are no longer handicapped by having to raise exorbitant sums for a deposit.”

Greater competition for high loan to value lending under Help to Buy 2 means consumers with 5% deposits have benefitted most from improving rates in recent months.

With Santander and NatWest for Intermediaries joining Help to Buy 2, the average interest rate for Help to Buy 2 products improved from 5.24% to 5.19% between December and January.

At the end of 2013 the average first time buyer put up a 20% deposit for a mortgage, twice the size of the 10% recorded in 2006/07.