price and deposit r will it make a difference to consumers?


The return of higher loan to value lending to the UK mortgage market should be welcomed. At first glance it is a positive step that should extend the possibility of new or refinanced home funding to more borrowers and is certainly a step forward in the rehabilitation of the mortgage market.


Lenders have been focused on risk management and this expansion in the number of higher loan to value deals is a sign we are moving towards more competitive times. But don’t mistake high loan to value products as a


breakthrough for consumers. Loan to value is only one feature of these mortgages. The pricing that accompanies higher loan to value products is, for the most part, just as super-size as the loan to values the products themselves actually allow. Consequently these mortgages are likely to be regarded by


borrowers and brokers alike as loans of last resort. If you need this level of gearing then you are going to pay handsomely for it.


If high LTV loans signal anything at all it is that lenders feel, rightly or wrongly, that property prices have little or no further to fall.


Indeed the boom in buy-to-let secured on rental income and capital value illustrates this point further. This is a subtle point that is clearly not enough to allay consumer fears over their individual job prospects but when accompanied by keener pricing will further embolden buyers. In the event of an interest rate rise these products will possibly get more attention from remortgaging borrowers but with no sign of rates moving until quarter 2 of 2012, current standard variable rates still provide better value than these new high LTV products. In isolation, higher LTVs mean little to consumers. Features have to be seen in the context of pricing and benefits. For the majority of already indebted consumers they are a long way from providing a good refinancing option or affordable first home.


Alison Beech, business relationship director at Spicerhaart


These deals are more a reflection of the growing confidence of the industry than of the consumer.


It has to be a good sign that 90% and 95% LTV deals are back in the marketplace, especially, of course for first-time buyers as this is the main mortgage area needing most assistance. I for one did not see such high LTVs returning so soon but I am


not complaining! In recent times the lack of mortgage availability to those with


smaller deposits has meant that the real winners have been those in the buy-to-let market. Those unable to get onto the property ladder have resorted


to renting instead of purchasing and therefore any new product offerings that assist the first-time buyers and stop the owned to un-owned property gap from widening are a welcome addition. This is of course if lenders are actually lending on these high


LTV products. As the LTVs increase, so do the target credit score requirements. And with an alleged one in four people having missed a


payment on unsecured credit in the last 24 months, those who actually pass the higher credit scores may well be few and far between. However we are now also seeing some of the non-credit


scoring lenders joining the party and loan sizes are now available up to £500k. The appetite appears to be there again. Even more excitement emanates from the growing price war


that we are starting to witness as lenders scrap for business volumes and rates plummet. But who knows for how long? And let’s not forget that the bank of Mum and Dad is still very


much active and there are sure signs that family gifted deposits are on the increase. We can’t ignore the statistics though. According to recent research the typical first-time buyer deposit


in April was £30k (20%) and the average borrowed was 3.13 times income with an average loan of £120k. Fast forward a few months and only then will we be able to see if the statistics show a marked increase in lenders actually lending to those with a small deposit or whether the 90/95% LTV mortgages are just a great way to increase lenders’ PR and visibility.


Dale Jannels, managing director, AToM


sense. Do you want to be a part of the next Bigger Issue? Email nia@thepublishinggroup.co.uk mortgAge introducer AUGUST 2011 27


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