Higher loan-to-value lending may be on the way back because of government intervention in the housing market, John Charcol’s mortgage technical manager has said.
Speaking about the first year of the Help-to-Buy mortgage guarantee scheme, which was launched on 8 October 2013, Simon Collins said it was having a positive effect on the broader housing market.
He said: “It has got the market thinking about higher LTVs, and actually that is not a bad thing.” But he warned that tight standards and “due diligence” on high LTV mortgages needed to be in place to avoid future risks.
Mr Collins said: “It is mainly when you do not do the due diligence that there are problems, but if you do things like a 95 per cent LTV mortgage properly, then everything should be fine.”
He added: “The mortgage guarantee scheme is a more rounded scheme than the Help to Buy equity loan scheme. It is helpful to the market as a whole rather than just one particular sector.”
Mr Collins said by bringing lenders back into the market for high LTV loans, the scheme had proved particularly beneficial for borrowers reliant on these.
He said: “Those people really got thrown a lifeline.”
Adviser view
David Penny, managing director of Somerset-based Invest Southwest, said: “Our experience has been that the types of client who may be eligible for support using Help to Buy are actually able to find better deals on the open market.
“We have not yet met a client whose only attractive option is a Help-to-Buy product, though I have no doubt they exist. So, in short, [it’s] a niche product with negligible effect on the market in my experience.”
