First time buyers struggle as high LTV mortgages remain scarce

15 May 2009 / by Rebecca Sargent
First time buyers continue to be priced out of the mortgage market, despite the fact that house prices have fallen, analysis from moneysupermarket.com has revealed.

The research has revealed that 17 per cent of those currently looking for a mortgage are looking for a loan to value (LTV) of 90 per cent. However, just six per cent of mortgage products fall into this category.

And, for those fortunate enough to secure a 90 per cent LTV mortgage, they face an interest rate that is 30 per cent more expensive than a 75 per cent LTV mortgage deal.

Commenting, Louise Cumming, head of mortgages at moneysupermarket.com said: "Despite falling house prices, finding a large deposit is no mean feat, we're generally talking about many thousands of pounds.

"It is a shame lenders continue to be so equity focussed – if an applicant can prove they are able to afford repayments, they should be trusted with the mortgage.

"Prospective borrowers should look to save as large a deposit as possible before making their move into the market. Building a 20 per cent deposit is likely to mean significantly lower monthly repayments," she advised.

Yesterday Abbey mortgages announced that it was increasing the LTV on all of its fixed rate mortgages from 60 per cent, to 70 per cent.

Commenting on Abbey's move, Ms Cuming said: "This is a step in the right direction, and is a good example of a bank trying to help its customers – others should follow their lead. Whilst 70 per cent is still high, it will reduce the thousands of pounds required upfront for a deposit, and as house prices have dropped it will open more doors for those looking to remortgage if they have lost equity in their property.

"However, as almost one in five moneysupermarket.com mortgage channel users are looking for products at 90 per cent plus LTV, it would be better to see the bar nudging up again to give first time buyers, and those with smaller deposits, a realistic chance of getting a mortgage at a competitive rate of interest," she added.

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