High LTVs: All hype and no action as 77% of brokers see no instructions
Two weeks after Aldermore launched its 100 per cent loan-to-value (LTV) mortgage and brokers have reported little or no action on the high LTV instruction front according to the recent poll by Mortgage Solutions.
77 per cent of brokers have not completed any 95 per cent or 100 per cent deals in the last six months while 17 per cent have completed between one and five transactions, 4 per cent between six and 10 and 2 per cent over 11 deals¹.
While no one expected that the reintroduction of 100 per cent deals to the market would solve the dire straits of the first time buyer or lead to a flurry of FTB activity, this small number of transactions highlights the fact there is unlikely to be a quick fix.
David Hollingworth, Communications Director at London & Country agrees:
“There are loads of factors impacting buyers purchasing a home such as high mortgage rates, getting a small deposit together or working on building a bigger deposit to access better rates.
“I’m sure many first-time buyers are questioning whether now is the right time to buy, while others have made the decision to hold off for a while and see how things pan out over the course of the year.”¹
Hollingworth also pointed out that the number of high LTVs was still “particularly thin on the ground”¹; Aldermore Family Guarantee Mortgage only being available via three distributors, and other 100 per cent LTVs – offered by Northern Bank, Tipton & Coseley and Marsden Building Society – are restricted to local customers.
The Aldermore Family Guarantee Mortgage also came with a comparably high 3-year fixed rate of 6.48 per cent. At a time where lenders are constantly slashing rates in a bid to undercut competitors and top the comparison charts, it is understandable why this rate looks so unattractive, particularly when it also relies on a 25 per cent parental guarantee.
But Hollingworth disagrees:
“You can say it’s [Aldermore’s Family Guarantee Mortgage] expensive compared to other three-year fixed rates for those with bigger deposits, which is probably why many first-time buyers aren’t going for it.
“But actually, what first time buyers need to understand is the 100 per cent LTV deals would have been charging 6 per cent or so a few years ago, so they shouldn’t rule them out completely.”¹
However, as we saw most recently in the buy-to-let market, the more lenders that dip their toes, there is the increased likelihood of more attractive rates.
Content correct at time of publication