HTB applicants get on the property ladder with deposits of less than £10k
Date online: 08/10/2014
Consumers appear to be using the scheme to its full potential with the average loan-to-value (LTV) for the mortgage guarantee scheme in August at 94%.
This is significantly higher than the market average of 72% and just 1% below the scheme’s maximum LTV of 95%.
As a result, the average deposit for a Help to Buy 2 application in August was just £9,229: 87% lower than the market average of £69,235.
The mortgage guarantee scheme is being used for affordable rather than high-end properties. The average HTB2 property price in August was £159,527: 31% lower than the market average (£231,306).
The typical primary income of a HTB2 applicant was £32,745 in August: 19% lower than the market average of £40,588 but still 24% higher than the UK average wage (£26,500).
Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), comments:
“The Bank of England recently gave the mortgage guarantee scheme its confident backing, confirming that it currently poses no threat to the financial stability of the UK and has no correlation with rising house prices. As the scheme reaches its first birthday, it is important that we recognise and build upon the positive changes it has brought to the mortgage market.
With average HTB2 deposits totalling less than £10,000 in August, the scheme has made home ownership possible for many first-time buyers* who otherwise would not have been able to buy in an environment of rising rents and increased house prices. Crucially, it has also normalised higher loan-to-value (LTV) lending, encouraging even those lenders who have not participated in the scheme to expand their 95% mortgage offering. This brings greater product choice to consumers and allows more affordable options to take centre stage.
However, now is not the time to be complacent: affordability is very much still a concern for first-time buyers, and more can be done to ease the path to home ownership. With a renewed focus on responsible lending thanks to the Mortgage Market Review and Bank of England safeguards, there is an important role for high LTV lending in today’s market. More lenders need to put their weight behind 95% mortgages to ensure buyers with small deposits aren’t unnecessarily barred from the property market.”