High LTV mortgages: Demand outweighs supply

14 October 2009 / by Andy Davies

More than a third of potential mortgage borrowers are now looking for high Loan to Value (LTV) mortgages with demand outstripping supply, according to moneysupermarket.com.

Analysis by the price comparison website has revealed that more than a third of mortgage searches are for mortgages available at or above 80 per cent LTV, however, of the current 2,200 mortgages deals on the market, only a quarter of deals can offer this.

Meanwhile, potential homebuyers looking for a 90 per cent LTV mortgage currently have a choice of just four deals on the market.

According to moneysupermarket.com, in addition to fewer deals being made available to borrowers, the value of the deals is 'seriously lacking'.

For instance, borrowers looking for a fixed rate mortgage will now pay an average of 1.41 per cent more on an 80-90 per cent LTV mortgage compared to a 60 per cent LTV mortgage, which is 0.05 per cent more than borrowers would have paid two years ago.

Prospective homebuyers borrowing £100,000 on a two year fixed 80 per cent LTV mortgage, can expect to pay around £99 extra a month, compared to a borrower with a 60 per cent LTV – which equates to nearly £2,400 over two years.

Commenting, Hannah-Mercedes Skenfield, mortgage spokesperson at moneysupermarket.com, said: "The best deals are aimed at borrowers who have a sizeable deposit or equity in their homes, but in reality, these products are limited to just a third of the consumers who are looking for a mortgage. Two years ago, the better deals were for borrowers who wanted to borrow over 80 per cent LTV but as a result of the credit crunch we have really seen this market change."

Ms Skenfield claims lenders should take a 'more balanced view' when offering deals and put as much importance on a borrower's ability to 'meet repayments as they do on deposit size'.
"An increased focus on affordability over equity would mean lenders offering more competitive deals with a higher LTV to those who clearly demonstrate they can and will fulfil the mortgage requirements," she said.

Warning borrowers without a significant deposit to be cautious about higher LTV products, Ms Skenfield added: "Some of the variable rates currently on offer at a higher LTV are a long way above the Base Rate, meaning that when rates rise, repayments could sky rocket."    

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