Improving Mortgage Availability and Falling Rates

Following a challenging year with a widescale withdrawal of high loan to value mortgages, the good news is that the mortgage market has bounced back over recent months with the number of 95% mortgage deals rising month on month. What’s more, rates are tumbling making it much more affordable to take out a mortgage.
According to Moneyfacts, the number of mortgage deals currently available to UK borrowers is at its highest level since March 2020 with over 4,500 deals available – just 700 fewer mortgage options than there were before the start of the pandemic, and in June 269 were launched.

The mortgage guarantee scheme was introduced in April of this year with the aim of encouraging lenders to re-introduce high loan to value mortgages to the market meaning that those with only a 5% or 10% deposit could purchase a home, whereas during the pandemic buyers needed around 20%. At present, the number of mortgages requiring a 5% deposit has leapt almost twentyfold over the last year. This time last year there were just 14 95% mortgages available – now there are 253.

For the first time since 2018, Moneyfacts has recorded an increase in mortgage options for all deposit sizes.

The Mortgage Guarantee Scheme kickstarted the mortgage market for those with a small deposit – with significant numbers of deals available with a 5% or 10% deposit. It is open to all buyers – those buying a first home as well as those moving up the property ladder – and can be used on properties up to the value of £600,000.

Even though the government’s scheme has been introduced, only 40% of lenders are using it. They saw it as a sign of confidence in the housing market and decided to launch their own products independently of the scheme. Lloyds, Santander, Barclays, HSBC and NatWest are all offering the loans, while Virgin Money is set to start offering them this month.

There’s good news for buyers as mortgages are also getting cheaper for all buyers. For only the second time in the last year, both the average overall two-year and five-year fixed rates fell over the course of the month to 2.55 per cent and 2.78 per cent, respectively.

These were the largest monthly reductions recorded for either rate since June 2020, as banks and building societies sought to attract customers with competitive deals.