by Mark Johnston
Is There a Boost in Higher Loan to Value Products?
In the current financial climate those with only a 5 per cent deposit, many of whom are struggling first time buyers, now have fewer options.
While the already ‘well serviced’ market for those with deposits of around 25 per cent has continued to grow, little has changed for those scouring for a mortgage deal with smaller amounts put by.
Recent figures show that in the last year the amount of first time buyer products has decreased by 31 per cent. There were approximately 1,786 products in 2011 and in 2012 this figure has dropped to 1,225.
According to some analysis the number of 90 per cent loan to value (LTV) mortgages appear to have fallen by around 26 per cent with in the last year, while the volume of 95 per cent loan to value mortgages has dropped a staggering 43 per cent in the past 6 months.
Recent data has also shown that those with a 25 per cent deposit, who in the eyes of lenders are often seen as less risky, now, have more than 850 deals to choose from than the same time last year and also 82 more deals to select from than just 2 months ago.
Figures show that despite the funding for lending scheme,which was launched in July to aid borrowing, some lenders still feel that higher loan to value (LTV) deals are much riskier and therefore now the majority of mortgages with high loan to value (LTV) ratios require the financial backing from a third party, such as a guarantor. These mortgages also come with even stricter checks and lending criteria.
However, moneyfacts.co.uk, a comparison website, has recently reported a small boost in high loan to value (LTV) loans, with 36 new mortgage deals in the 85 per cent tiers in August 2012. This is a complete reversal from the drop seen in July this year.
it seems that deals with a maximum loan to value (LTV) of 90 per cent have also increased to 316 compared to 228 this time last year, which is an increase of 43 per cent.
The website also shows that there are 16 more products in the 85 per cent loan to value (LTV) tier, 11 fixed and 5 variable and a further 15 in the 90 per cent loan to value (LTV) tier, 9 fixed and 6 variable. The 95 per cent loan to value (LTV) tier has also seen approximately 5 more products all of which are fixed.
Some experts have suggested that in light of these figures some lenders appear to be relaxing their attitudes to higher risk lending, perhaps in reaction to the recently launched funding for lending scheme.
Therefore these latest figures will be good news and also a welcome relief to many borrowers who have struggled to find suitable mortgage deals within their financial capabilities.
Sylvia Waycott, moneyfacts.co.uk, finance expert, said “increasing loan to values will create a knock on effect in the whole housing market. Not only will it aid the stagnation of the first time buyer market, but also the second mover market because they need first time buyers to sell to”.
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