Return of the high LTV
There has been an increase in activity from lenders launching mortgage deals at higher loan-to-values (LTVs), according to Moneyfacts.
There were 36 new mortgage deals in the 85% LTV tiers and above in August 2012, a complete reversal from the drop of 26 products the previous month.
In a breakdown of individual tiers, there were 16 more products in the 85% LTV tier (11 fixed and five variable), 15 in the 90% LTV tier (nine fixed and six variable) and five in the 95% LTV tier, all of which were fixed rate products.
This suggests that lenders are relaxing their attitudes to higher risk lending, perhaps in reaction to the government’s recently-launched Funding for Lending scheme, which aims to make £80 billion of cheap funding available to banks and building societies on condition that they lend more to small businesses and consumers in the hope that this will kick-start the economy.
However, it appears that building societies are leading the way at offering products targeted at those with smaller deposits, with 10 of the 15 providers which launched 90% plus LTV products being building societies.
Sylvia Waycot, finance expert at Moneyfacts.co.uk, commented: “Attaining a deposit becomes more realistic if LTVs are raised and so after years of frustration potential FTBs must be doing jigs of joy in the street.
“Increasing LTVs will create a knock-on effect in the whole housing market. Not only will it aid the stagnation of the FTB market, but also the second movers market because they need FTBs to sell to. House buying as we all know is a chain and every link is essential; strengthen one link and the whole chain benefits.”