First-time buyers have been hit by reduced mortgage availability in the wake of Covid-19, but the latest figures reveal an increase in products for borrowers with small deposits.

The number of mortgages on the market has risen for the first time since June, with choice also increasing for borrowers with small deposits.

A total of 2,404 mortgages are currently available - 145 more than in October, according to financial information group Moneyfacts.

The biggest increase was seen in mortgages for people borrowing 75% and 80% of their home’s value, with these tiers accounting for 63% of the rise.

But there was also a glimmer of hope for borrowers with small deposits who have been hit by the withdrawal of high loan-to-value mortgage products in the wake of the Covid-19 pandemic.

The latest data showed a slight improvement in mortgage availability for people with only a 10% deposit, with 56 different mortgages now on offer, up from 51 in October.

Meanwhile, 35 new mortgages were launched for those with a 15% deposit, bringing the total to 344.

But despite the improvement, the number of different mortgages available is still less than half the level seen in November last year.

Why is this happening?

The coronavirus pandemic and the economic uncertainty created by lockdown restrictions has caused lenders to review the level of risk they were prepared to take on.

Many lenders subsequently streamlined their mortgage ranges and withdrew products for borrowers with small deposits.

Despite the reimposition of lockdowns and other Covid-19 restrictions, the recent buoyancy of the housing market, combined with strong mortgage demand, appears to be tempting lenders to launch new products.

Who does it affect?

The increase in mortgage choice is good news for potential buyers as it follows five consecutive months during which lenders reduced their range.

The growth in the number of mortgages available for people with only small deposits is particularly welcome, as this sector of the market was hardest hit when lenders reviewed their ranges earlier this year.

The majority of mortgages for people borrowing 90% of their home’s value are currently being offered by small building societies, such as Penrith, Scottish, The Cumberland, and Teachers Building Societies, and may be restricted to people living in the local area.

Recently, Accord Mortgages released a series of 90% LTV ‘pulse’ deals, available for two days only, for first-time buyers. It’s latest 90% LTV deal, which ran for nine days, was available to all borrowers. Metro Bank recently relaunched its 90% deal too. 

 

Meanwhile, start-up lender Generation Home has just launched a new-style mortgage that can be applied for by a group of up to six friends or family members.

The idea is that groups of friends who want to live together could buy a property together, or family members could assist a first-time buyer in getting on to the property ladder.

While the income of different people named on the mortgage application will be included in the calculation for how much can be borrowed, the ‘booster’, as they are known, has the choice of either contributing to regular repayments, or just being on standby in case they are needed.

What’s the background?

While mortgage availability increased in November, average mortgage rates also rose for the fourth month running.

The typical cost of a two-year fixed-rate deal edged ahead by 0.05% to 2.43%, while interest on a five-year one rose by 0.08% to 2.7% - both broadly in line with levels seen in March this year.

Meanwhile, the average time a mortgage product is available before lenders withdraw it dropped to just 28 days, the lowest level since August 2018.

This means borrowers will have to move quickly to apply for a mortgage after identifying a suitable product, as they are likely to have only a small window of time before it is withdrawn.

Top three takeaways

  • The number of mortgages available has increased for the first time since June
  • A total of 2,404 mortgages are now available - 145 more than in October
  • The biggest increase was mortgages for people borrowing 75% and 80% of their home’s value.

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