FTBs struggling as 95% LTV rates begin to rise
New data from Moneyfacts has revealed that 95% LTV rates on on the rise. Average two-year fixes at 95% have risen by as much as 0.35% since the start of the year and by 0.10% since April.
The average 95% LTV two-year fix has risen from 3.89% in January to 4.24% in July.
Borrowers looking for a two-year fixed rate at 95% LTV will therefore see monthly repayments increase by £29.10 if they take out a mortgage today compared to the start of the year.
The average five-year rate at 95% LTV has also risen from its lowest ever point of 4.37% in January 2017 to 4.55% in July.
90% LTV rates have also seen a slight increase, with two-year fixes rising from 2.72% in January to 2.77% this month.
Charlotte Nelson, Finance Expert at Moneyfacts, said: “Despite providers competing to sit at the top of the Best Buy tables, it is clear to see that the wind is once again shifting around for those at higher loan-to-values. This is disappointing news for first-time buyers who have struggled to gather enough cash to put towards a deposit, only to now find rates are starting to rise.
The increase can be largely explained by the inflationary pressures the economy is facing. As inflation rises, borrowers’ incomes get eaten away and the probability of a borrower defaulting rises. The added speculation of a possible base rate rise in the near future has seen providers re-evaluate the lows that borrowers were starting to get used to.
First-time buyers might feel like they can never catch a break, facing large deposits and now rising rates, but it is not all doom and gloom, with more deals on the market at current than at any time since the financial crisis.
With the Bank of England scrutinising high LTV lending, this upward pressure on rates looks like it may continue. So borrowers looking for a deal at a higher LTV will need to act now if they want to make the most of low rate deals before their time is up.”