Genworth warning on risk of high LTV mortgages
The return of 100 per cent loan-to-value mortgages offers false hope for first-time buyers and risks undermining the entire mortgage market, a European mortgage specialist has said.
Angel Mas, president of Genworth Financial's European mortgage insurance operations, said the return of the 100 per cent LTV did not offer "a real glimmer of home" to first-time buyers who do not have large deposits.
His comments came after Aldermore announced it would offer a mortgage at 100 per cent LTV, joining products by Northern Bank, Tipton & Coseley Building Society and Marsden Building Society.
Mr Mas said: "We disagree with the concept of a true 100 per cent LTV mortgage on a number of grounds and warn lenders and first-time buyers about the development of such products.
"There is currently a real threat the re-emergence of extremely high LTV mortgages could lead to a new wave of high-risk, low-quality residential mortgages."
He added that while credit-worthy first-time buyers should be give access to high LTV financing, they should be required to prove they have the discipline to save for a minimum deposit.
Mr Mas added: "Without a clear, sustainable framework, the system remains exposed to the same prudence flaws that contributed to the credit quality issues in recent years."
Colin Parkin, director of Lincolnshire-based Ample Financial Services, said: "The return of 100 per cent LTV mortgages is a mad move and irresponsible lending.
"If people are allowed to take these mortgages it will get us back to the crazy situation where lenders were offering 125 per cent LTVs and we will get another global economic meltdown caused by rubbish mortgage lending."