It’s ‘wait and see’ in the high LTV space for lenders, advisers and first-time buyers

November of course feels like a pivotal month for so many reasons, with – as I write – a Bank Base Rate (BBR) decision still to come this month and on the 26th one of the most anticipated Budget announcements in recent memory. Although they have all tended to feel like this in recent years so perhaps no change there.

A combination of these two events will shape the housing and mortgage markets, and if we’re led to believe some of the more extreme policies being considered, then fundamentally reshape it for many years to come. 

In that sense, it is perhaps not surprising that the high LTV market for first-time buyers appears to be taking stock – and perhaps holding its breath – at present. Can any of us say with real confidence what the mortgage/housing markets are going to truly look like come the 27th November? I know I can’t.

Of course this lack of certainty has, to some extent, been completely self-generated by a Government who clearly wanted to try out some potential policies – the abolition of stamp duty, mansion taxes, changes to council tax, etc – via the media before it made any sort of commitment. Understandably, the general public on hearing these, thought it would be better to wait and see and thus we have had a subdued period lately.

That has certainly been the case in the high LTV mortgage market. Last month I noted the steep fall in product availability, moving from 313 95% LTV mortgages available at the start of September to 256 at the start of October, and this month that has dipped again, albeit by the smallest amount, so we have 255 on offer.

This is split between 235 fixed rate products and 20 trackers/discounts/variables, and if I was a betting man, I wouldn’t anticipate seeing any major movement upwards over the course of the next few weeks, as lenders too eye what the Government might have to say on the important areas mentioned above, plus of course we can’t rule out specific policy announcements aimed at first-time buyers themselves.

It is exactly the same scenario in the much more niche 100% LTV product space where we noted a dip in product choice from 21 down to 10 last month, and again we have maintained that number at the start of November with 10 still available. 

These are product options based on the Nationwide’s monthly average house price which currently stands at £272,225, up 0.3% on last month, and showing a 2.4% annual increase. Each month I look at the product numbers for those would-be first-time buyers who might not have any deposit to put down, and those who have 5%, which this month would be just over £13.6k. 

Mortgage market headlines over the last week or so have seen a flurry announcing product rate cuts, which have followed similar downward pressure swaps, and it was interesting to see if this was just at lower-risk, lower LTV price points or if it had seeped into high LTV lending.

Unfortunately, judging by the ‘best buys’ that’s not been the case, quite the opposite. In the two-year fixed rate space, Lloyds remains top with a 4.71% deal available to current account holders only however this was 4.66% last month. Just behind are the Skipton and the West Brom with 4.8% deals. 

The Skipton now tops the five-year fixed rate table with a 4.77% deal, with the Clydesdale (4.78%) and HSBC (4.79%) just behind. 

The mutual sector continues to dominate the sector when it comes to 95% LTV trackers, discounts or variables. Scottish Building Society has a 4.74% two-year discount, followed by Furness with a 4.84% product in the same space, while Bath also offer a two-year discount at 4.89%. 

For those with no deposit to put down, Lloyds continues to offer its three-year fix at 4.44% - again only for current account holders – while the two same lenders make up the top three again with Bath Building Society’s two-year discount at 5.09% and Beverley Building Society’s three-year discount at 5.14% both still available. 

Judging by that quick rundown, lenders have decided to cut rates lower down the LTV risk scale recently, and again we might be ‘waiting and seeing’ over the course of November in order to get further clarity, before lenders decide whether to act either at the 95% LTV or 100% LTV level.

Overall, it is I’m afraid the Budget that looms largest over everything and everyone, and much is riding on what sort of announcements we get, whether they are as radical as has been rumoured, or if the Government simply feels it needs to keep generating greater levels of tax-take, and it’s just more of the same, but just at higher rates. 

By this time next month, we should all have a much clearer view of the short-term future. Whether we like the view remains to be seen.