The return of the 90% mortgage?

by Mark Johnston

Most borrowers with deposits of 15% or less have been virtually barred from the housing market since the credit crunch.

Robert Powell of lovemoney.com suggested that “back from the dead, mortgages with a high loan to value ratio are now crawling out of the grave”.

Many major high street lenders have once again begun to offer mortgages to those who do not have huge deposits, it seems.

A few 90% mortgages have slowly begun to creep back on to the market over the last few months and after the recent announcement of government plans to underwrite some mortgage deposits, it is possible the range of deals at such high loan to value (LTV) ratio’s will grow further.

According to data from moneyfacts, there are approximately 84 mortgages with a 90% loan to value (LTV) on the market at the moment, many with an average rate of 4.97%, just 6 months ago these rates were at 5.30%.

HSBC, Nationwide and Woolwich have all begun to increase loan to values. In October 2011, HSBC launched a range of fee free mortgages with a maximum loan to value (LTV) of 90%. More recently Natwest has launched two 90% loan to value (LTV) deals, a 2 year fixed at 5.79% and a 5 year fixed at 6.35% both with a product fee of £999.

Head of sales at Natwest intermediary solutions, Mark Bullard said “with the challenge of raising a large enough deposit still being the biggest issue for first time buyers, I am delighted that we are able to offer a choice of deals for those clients who have a 10% deposit”.

However, Ray Boulger, of mortgage brokers John Charcol believes “the recent improvement in rates at 90% loan to value will not last, the best deals will probably only last fro a few more months”.

Andrew Hagger of money.net.co.uk has also warned that “even the entrance of the biggest lenders might not provide the lifeline needed by some would be buyers. Lenders are still going through mortgage applications with a ‘fine tooth comb’, so if borrowers have a patchy credit history, it does not matter if there are 2 mortgages at 90% loan to value on the market or 200”.

Many lenders and mortgage brokers have also alleged that some other mortgage lenders including the post office, only ‘seem’ to offer home loans to those with small deposits, in practice most applicants are turned down and little money is lent on the advertised terms.

The post office has consistently offered attractive rates with deposits as little as 10%, but the company are secretive about how much it actually lends on these deals and how many applicants it turns down.

As these loans are only available directly rather than via brokers, there is no external data on lending volumes.

The post office however have denied any suggestions that their low deposit deals were ‘window dressing’ or ‘fake’ and added that they were and still are committed to growing their mortgage business, with 4 in 10 of their successful applicants being first timer buyers borrowing 85% to 90% of the property price.



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