High LTV Lending on the Rise
2 minute read
Reports show that the number of higher loan-to-value (LTV) house purchase approvals rose dramatically in the month of February and made up 16.9% of house approvals during the month. February marked the third month in a row in which higher LTV approvals have grown, which has led industry experts to suggest that 100% LTV mortgages may return by the end of the year.
Why High LTV Lending is Popular
For a first time buyer, a high LTV mortgage offers the opportunity for applicants to acquire a mortgage with a low deposit. When trying to find one’s way onto the housing market, first time buyers inevitably find it difficult to put together the deposits required on properties. High LTV mortgages work by calculating how much of the value of the property is covered in the loan. For example, on a property worth £120,000, if the loan-to-value was 50%, then the loan would cover £60,000, whilst the rest would be a deposit. Specifically High LTV mortgages refer to mortgages with a much higher LTV ratio, for example, 90%. On a house of the same value, this would result in a far lower deposit of £12,000.
100% LTV Mortgages
For most first time buyers, or buyers without the equity to produce a high cost deposit, the opportunity to make a short term saving, but still acquire the house one desires is clearly a popular one. For many, a mortgage without a deposit is an extremely enticing objective. 100% LTV mortgages are now being seen in the mortgage marketplace, although are somewhat restrictive and come with a number of caveats, for example family guarantee mortgages forcing first time buyers to secure loans against properties owned by their families. Experts, however expect them to make a strong return, in their purest form by the end of the year. Currently high LTV lending is safely below the levels seen in 2007, when smaller deposit borrowers made up around one third of total lending. For assistance with your mortgage application, speak to Just Mortgage Brokers today.