First-time buyers unaware of 95% LTV mortgages

The number of 95% loan-to-value (LTV) mortgage deals available to first-time buyers is at the highest level since before the financial crisis, according to the Mortgage Advice Bureau.

Data from Moneyfacts shows there are currently 59 deals requiring only a 5% deposit available from 21 different lenders. This is up from just 25 in February 2011, nine back in 2010, and only three at the same time in 2009.

Even using the most conservative estimates, Mortgage Advice Bureau suggests there could be over £210 million worth of mortgage finance available to first-time buyers with a 5% deposit right now. Based on the average house price bought by first-time buyers, this is sufficient for over 2,000 first-time buyers to buy their first home right now.

As an indication of what this would mean for the housing market, during the 1980s and 1990s there were typically well over 500,000 first-time buyers every year – that’s over 1,350 a day, compared to around 520 a day now.

Brian Murphy, head of lending at Mortgage Advice Bureau, says first-time buyers are being held back from taking up these deals only because they are unaware that they are available.

Referring to research published by the Building Societies Association and a report from HSBC last year, Murphy commented: “Well over 85% of young renters aspire to become homeowners but the vast majority of these say the fact they cannot raise a deposit is the key reason for not buying.”

He continued: “There is a widespread perception that a minimum 20% or 15% deposit is required and they just don’t realise that there are now a lot more competitive 90% and 95% LTV mortgages back on the market. The fact that lenders are open to first-time buyers again is a really positive sign.”