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Help to Buy 2 fuels bank re-entry to 95% LTV market

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Banks have returned in droves to the high loan-to-value (LTV) mortgage lending market since the launch of Help to Buy 2, replacing mutuals as the majority product providers in this sector.
Help to Buy 2 fuels bank re-entry to 95% LTV market

Building societies have dominated higher LTV lending since the downturn due to banks’ reluctance to offer the products, according to Moneyfacts data.

However, since the launch of Help to Buy mortgage guarantee scheme, or Help to Buy 2, in October 2013 106 fixed and 25 tracker rates are now available at 95% LTV, up from 35 fixed and eight tracker rates in August 2013.

This is a rise of 303% for fixed rates and 313% for trackers over the last six months.

Sylvia Waycot, editor at Moneyfacts, said: “It is interesting to see how the banks have so quickly dominated the fixed rate 95% LTV market from the building society sector.

“Having been pushed out of the fixed sector, building societies have responded by offering a larger number of 95% variable mortgages than has been seen for some time.

However, Ray Boulger senior technical manager at John Charcol said credit scoring remains tight for borrowers with smaller deposits.

“One of the key things brokers can bring to the table is assessing whether the mortgage lender is willing to lend to a borrower with a lower credit score. First-time buyers traditionally have lower credit scores because they have probably moved around a bit and may have sparser credit records. Placing an application with a building society or smaller lender like Aldermore, who assess on a case-by-case basis, can help,” he added.

Apart from Halifax, the majority of big lenders still leave a hard foot print on applicant credit files with a decision in principle, which also compromises applicants’ credit files, he added.

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