High Loan to Value Loans are on the up……

by Mark Johnston

High Loan to Value Loans are on the up……

The boom years have been and gone and most consumers are glad to see the back of crazy deals such as Northern Rock’s 125 per cent ‘Together mortgage.’

But the demise of high loan to value deal of 90 per cent or 95 per cent has hit first time buyers hard along with a boom in house prices lifting the cost of deposit to new height.

housesTherefore, just last year the lending market was thorny for first time buyers, this is due typically to the fact they have less equity, so banks eyed them with caution as property prices need only fall a little before a high loan to value (LTV) borrower falls into negative equity, and the bank stands to lose.

However, according to a Bank of England report the number of higher loan to value (LTV) mortgages on offer is set to increase.

Many lenders have reported that average loan to value (LTV) ratios have risen, and many are therefore planning to increase their lending at 90 per cent loan to value (LTV) in the third quarter, which should benefit many first time buyers.

The Bank of England’s Credit Condition Survey revealed a sustained effort by lenders to increase their high loan to value (LTV) lending in second quarter of 2013.

Recent research reveals that in June this year high loan to value (LTV) lending hit their highest levels since September 2008.

Also according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor, house purchase lending to high loan to value (LTV) borrowers hit a four and a half year high in June 2013.

Data shows that there were 7,046 loans advanced to borrowers with a deposit of less than 15 per cent during June 2013 which is up 47 per cent from 4,790 in June 2012.

There were also 3 per cent more high loan to value (LTV) loans in June compared to May this year.

The improvement in high loan to value (LTV) borrowers, most of which are first time buyers, is also reflected  in the growing number of loans on properties under £125,000 (typical first time buyer property). There were 13,975 loans approvals for purchase of property worth under £125,000, 34 per cent more than this time last year, when there were just 10,433.

Richard Sexton, director of e.surv chartered surveyors, says”Buoyed by Funding for Lending, and having had enough time to adjust to regulatory requirements and balance sheet restructurings, banks are more prepared to lend to first time buyers”.

So all in all it appears that lenders are now more willing to grant house purchase loans to borrowers with small deposit, and have introduced a wider range of low rate mortgages into the market

In conclusion there are signs that higher loan to value deals are making a comeback and all these new innovative products and plans show an increase in the supply of high loan to value mortgage deals that should brighten the hopes of prospective home buyers.

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