95 per cent LTV Mortgages: Good news or false hope?

Published: 29/06/2011

An increase in high Loan-to-Value (LTV) products on offer has naturally resulted in LTV’s getting a lot of air time at present. 90 per cent LTV mortgages have doubled over the last two years and, in the past few weeks, 95 per cent LTV mortgages have resurfaced on to the market.

Clydesdale Bank (3 year fixed at 6.99 per cent), Nationwide (3 year fixed at 6.29 per cent) and Skipton Building Society (3 year fixed at 5.99 per cent) have all reintroduced 95 per cent LTV mortgages to their product ranges.

Such a move is surely the break first time buyers have been crying out for and, where one goes, competition tends to follow?

Think again

Lending statistics tell a different story. Despite the quota of 90 per cent LTV mortgages doubling in the past two years, lending figures do not support this positive influx.

In Q4 2010, gross lending was £36.8bn down from £41.2bn in Q4 2009¹, suggesting, as Paul Hunt, Managing Director of Phoebus Software, eloquently puts “high LTV products are little more than window dressing […] a flashy way to grab the limelight and give hope to first time buyers.”¹

95 per cent LTV mortgages create a misleading notion that things are getting easier for first time buyers. But the truth remains, behind these attractive deals continues to lurk strict lending criteria.

Hunt makes the apt analogy – “Buyers who believe the hype about high LTV lending will meet the same disappointment as those who listen to the hype about the English football team.”¹

Sources:
¹Mortgage Strategy (June 2011)

Content correct at time of publication