Have FTB mortgages really returned? Defaqto finds majority only available to select few

07 December 2020

Of the 86 mortgages available to FTBs, only 25 are actually available to all. There are only 8 intergenerational mortgage products today compared to 24 a year ago

It's good news for first time buyers as more mortgage lenders return to the 90% LTV market. However, borrowers may be disappointed as they are only available to a select few, according to new research by Defaqto, the financial information experts.

There are 86 mortgages available for First Time Buyers at 90% LTV or more today, but only 25 of these are widely available to everyone as most have some sort of restriction based on postcode or are only available through selected intermediaries. Defaqto found that 22 mortgages are restricted by postcode, 25 are not available in Wales and 18 are only available through certain broker networks. So, while there are more products available to First Time Buyers than a month ago and more lenders are offering the higher LTVs than they were, many borrowers still can’t access them.

Additionally, these products are more expensive today than they were a year ago. The average 90% LTV product costs 12% more than it did a year ago[i]. However, the rates are still low looking back over a longer period.

The current Fixed Rate best buys that are available to most borrowers are:

2 Year Fixed Rates

     

Provider

Product

Initial Rate Payable

Fees Payable

Nationwide Building Society

Flex 2yr 3.49% Fixed FTB C/B LTV 90%

3.49%

£999

TSB

2yr 3.69% Fixed LTV 90%

3.69%

£995

Nationwide Building Society

Flex 2yr 3.74% Fixed FTB C/B LTV 90%

3.74%

0

TSB

2yr 3.84% Fixed LTV 90%

3.84%

0

       

 

 

 

 

 

5 Year Fixed Rates

     

Provider

Product

Initial Rate Payable

Fees Payable

Nationwide Building Society

Flex 5yr 3.54% Fixed FTB C/B LTV 90%

3.54%

£999

Virgin Money

5yr 3.69% Fixed FTB LTV 90%

3.69%

£995

Nationwide Building Society

Flex 5yr 3.74% Fixed FTB C/B LTV 90%

3.74%

0

TSB

5yr 3.79% Fixed BBR FTB C/B LTV 90%

3.79%

£995

Yorkshire Building Society

Flexi 5yr 3.79% Fixed H/P LTV 90%

3.79%

£995

Virgin Money

5yr 3.83% Fixed FTB LTV 90%

3.83%

0

Loughborough

5yr 3.89% Fixed LTV 90%

3.89%

0

TSB

5yr 3.94% Fixed LTV 90%

3.94%

0

Another option for those who have family able to help is to consider an intergenerational mortgage. This is where a relative, typically a parent or grandparent, puts their savings with the lender to guarantee the mortgage. The relative still receives interest on their savings, some of which are market leading at 1.61% AER for five years with Barclays, and 1.65% with Lloyds for three years; the family member should get their savings back after a fixed term. However, if the borrower misses mortgage payments, then the lender will use the savings to offset this.

With the Family Assist products, there is not as much choice as there was last year (8 products today compared with 24 a year ago). However, the interest rates on these products are competitive. In fact, the Barclays Springboard 5 Year Fixed rate at 95% LTV is lower than the standard 90% LTV fixed rate products at 3.05% compared to 3.54% equivalent 5 Year Fixed Rate with Nationwide BS. So if a family member is willing to help with a deposit which they will get back, or use their house as collateral, this could be a good option to consider for some.

The current best buys for Family Assist mortgages are:

           

Provider

Product

Initial Rate Payable

Fees Payable

Maximum LTV

Security Deposit Types Third Party

Barclays

5yr 3.25% Fixed LTV 100% Family Springboard

3.25%

0

100%

linked savings deposit

Lloyds Bank

3yr 3.25% Fixed LTV 100% Lend A Hand*

3.25%

0

100%

linked savings deposit

Mansfield

5yr 3.89% Fixed LTV 100% Family Assist

3.89%

£199

100%

collateral charge, linked savings deposit

Tipton & Coseley

5yr 3.09% Fixed Family Assist LTV 99%

3.09%

0

99%

collateral charge, linked savings deposit

Barclays

5yr 3.05% Fixed LTV 95% Family Springboard

3.05%

0

95%

linked savings deposit

The Family Building Society

5yr 3.64% Fixed H/P C/B LTV 95% Family Mortgage

3.64%

£599

95%

collateral charge, linked savings deposit, offset savings account

 

 

 

 

* only available to existing current account customers

 

 

 

       

Provider

Product

Initial Rate Payable

Fees Payable

Maximum LTV

Security Deposit Types Third Party

Mansfield

3yr 2.30% Discount LTV 100% Family Assist

3.05

199

100

collateral charge, linked savings deposit

Tipton & Coseley

Term 1.55% Discount Family Assist LTV 100%

3.39

0

100

collateral charge, linked savings deposit

 

Mansfield and Tipton & Coseley have regional restrictions on their products

       
                   

For those who have family who own their own home and want to help but don’t have the cash, they may consider equity release. This is where the homeowner borrows money against the equity in their home, which is paid back on their death through the sale of their property. The benefit of equity release is that the relative does not have to make any repayments while they are alive but they will still accrue interest, which is added to the loan, and it can be restrictive if they later want to move.

These products have improved significantly in recent years and are currently the cheapest they have ever been. This may be a good option for those who are able to give some of their own equity to help their family get a home. The average interest rate is now 4% and the lowest rate available for someone aged 65 is just 2.25%, which is historically low; however these products can only be taken with professional advice as they are more complex than standard mortgage products.

Katie Brain, Banking Expert at Defaqto, comments:

“This year we have seen many 90% LTV products launched into the market, only for them to be pulled just days later. It looks like the market is stabilising now and borrowers have more certainty about getting one of these mortgages.

“The bad news for first time buyers is that many of these products have restrictions which prevent the majority of people from accessing them, so they still have little choice. If they can get help from family in the form of an intergenerational mortgage or through equity release, there are far more options available to them. The good news is that with these products, the rates are historically low and so these are more affordable now than they have been.

“For anyone looking to buy a home, it is important to get your finances in order, clear as much debt as you can and build up your savings. When you are ready to make the leap, it is worth consulting a professional adviser to guide you through the process and help you get the best deal for your needs.”

Buying a home is a huge investment and Defaqto recommends that all those looking to get a mortgage seek professional advice to get the right product for their individual circumstances.

Product data taken from Defaqto Matrix on 07.12.20

 

ENDS



[i] The average rates for 90% LTV products show a 12.72% increase for 2 year fixed rates and 12% increase for 5 year fixed rates, year on year.

Contact information

Newgate: Vanessa Chance, Defaqto@newgatecomms.com / 020 3757 6870

Defaqto: pressoffice@defaqto.com

About Defaqto:

Defaqto is an independent financial information and technology business. Its unbiased fund and product information provided as expert Ratings, coupled with its market-leading software solutions helps consumers, financial institutions and financial advisers make better informed financial decisions.

 

Defaqto has been operating for over 25 years and works independently. Defaqto employs over 60 analysts spending 400 hours a day monitoring the market and analysing more than 43,000 financial products and funds in the UK, ensuring that the information provided is accurate and up to date.

 

Defaqto Star Ratings

Star Ratings allocate a product or proposition a rating of 1 to 5, depending on the quality it offers. With a 4 or 5 Star Rating indicating the most comprehensive offerings in the market.

 

Available through Defaqto.com and Defaqto’s financial planning software, Engage Core, Defaqto Star Ratings provide an independent and unbiased industry standard for indicating where a product sits in the market in terms of feature quality and comprehensiveness. Consumers and financial advisers alike can see, at a glance, how comprehensive a financial product is.

 

Access further information about Defaqto at defaqto.com

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