Going Back to the 90s

Will the Stamp Duty Holiday be Extended

There aren’t many 90% loan to value (ltv) mortgages available at the moment. In fact, if you have less than a 15% deposit, finding a mortgage can be difficult. This is having a big effect, especially on first time buyers. So what’s happened, why and what are the alternatives?


At the beginning of lockdown, many lenders reduced their maximum loan to value (ltv) limits. Many of the mainstream lenders reduced their ltv lending to between 60 – 75%.

After lockdown was eased, lenders slowly starting to increase their ltv limits. However, many were surprised at the level of demand given the Covid situation.

The number of 90%ltv mortgages available slowly reduced due to a number of factors. The high demand for mortgages in general meant that many lenders did not need to lend above 85%. Given that nobody knows what the future holds and higher ltv lending is more risky for the lender, there was no need to provide 90%ltv mortgages.

Furthermore, lenders had to deal with other issues around their staff working remotely. Limiting their product offering helps to reduce work flow. Usually, you would expect a lender to make the most of such a strong market and recruit accordingly. However, given the uncertainty around sustainability, not to mention the logistics, this is not something that they are likely to do.

The Result

As it stands, there are very few 90%ltv mortgages available. Nationwide have a product for first time buyers, but strict qualifying criteria has to be met.

There are a few options with other lenders, but these tend to be with higher than average rates and for 5 years. For example, at the time of writing Metro Bank have a 3.99%, 5 year fixed rate available. Other products are also limited to a geographical area which is dependent on the lender’s location.

It has become the norm for lenders to release 90%ltv mortgage products for a limited period. This is not a sales gimmick. Lenders are literally telling people the release dates AND the withdrawal dates at the same time. These are usually for periods of only 2 -3 working days due to the demand.

For example, Accord Mortgages (Yorkshire Building Society) recently released a 90%ltv mortgage product on the 5th October, telling people it was only available until 8pm on the 6th October.

The overall result is lack of mortgages for people with less than 15% deposits. First time buyers usually fall into this bracket and feedback from some estate agents has been that this is leading to properties in the lower price brackets being on the market longer than relatively higher priced properties.

Historically you would expect the opposite as the market becomes narrower as you go up the ladder. However, it would seem that borrowers for higher valued properties tend to have more than a 15% deposit and are keen to benefit from the reduced stamp duty up until the end of March 2021. Another indicator of strange times.

So What Are the Options?

Boris Johnson has recently revealed plans for ‘Generation Buy’. In short, this will be a project to help people with lower deposits (i.e. 5 – 10%) purchase a property using longer term fixed rate mortgages.

What will this mean? At the moment this isn’t clear. Examples could include backing mortgage lenders to share the risk and/or reviewing how lenders underwrite these loans in terms of risk and affordability assessment. Or it could just be a political stunt with no substance. Only time will tell.

If you haven’t got the time or patience to wait for something like this, do you have any alternative options?

Based on recent enquiries we’ve received, there may be a few.

Help to Buy and Shared Ownership products are still available with as little as a 5% deposit. However, this limits property selection as Help to Buy is for new build properties and Shared Ownership may not suit you based on location, availability and preference.

The Bank of Mum and Dan (or Nan and Grandad) is also worth considering where available. This involved a gift from family which could be savings, investments or a release of equity from property they own (residential or investment).

If this doesn’t suit, there are mortgages available up to 100%ltv if families are prepared to offer savings and/or property as extra for security for the loan for a short time. This would suit people who can’t afford or do not wish to gift money on a non-refundable basis as they need it for their own plans. ‘Family Assist’ mortgages are available through a few providers and can provide the solution for people with low deposits.

Unsecured borrowing to increase a deposit is also acceptable to some lenders. However, this approach needs to be carefully considered from an affordability point of view.

Whatever you decide to do, each approach has pros and cons so it’s important to get independent advice before making any decisions.

If you’d like to discuss your plans, contact us for a FREE consultation. We’ll be happy to help.