MortgagesDec 18 2015

95% LTV mortgages at post-recession high

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95% LTV mortgages at post-recession high

The amount of 95 per cent loan-to-value mortgage products available is at a post-recession high, according to mortgage insurer Genworth.

The London-based insurer said there has been a surge of product launches over recent months, with the number of 95 per cent LTV mortgage products rising by 84 per cent year-on-year to 260 last month.

According to Moneyfacts Mortgage LTV Tracker, this is the largest amount of 95 per cent LTV deals available since the recession.

Analysis by Genworth, revealed the number of mortgage products available to buyers with a 5 per cent deposit has risen by 119 over the last year, from 141 in November 2014.

Simon Crone, Genworth vice president at Mortgage Insurance Europe, said: “There is little doubt that the Help to Buy mortgage guarantee has played an important role in rejuvenating the high LTV market.

“However, beneath the surface, it remains a long way short of full health and there is a danger that what we are seeing is a temporary restoration of appetite from lenders thanks in no small measure to government efforts.”

Figures also show there are more than six times as many 95 per cent LTV loans available now than in September 2013, when there were 43 on offer.

This, the insurer pointed out, was before the government’s Help to Buy mortgage guarantee launched.

In comparison to 95 per cent LTV, competition in other areas of the market has stayed relatively stable or – in some cases – even declined.

Mr Crone said: “For many aspiring first-time buyers, raising the average deposit of 16 per cent is simply not an option – especially in places like London where this amounts to vast sums of money.

“Hopeful buyers struggling to put money aside each month can quickly see deposit sums getting further and further out of reach, which is desperately disheartening when many can afford the repayments on a mortgage once they’ve got over this initial hurdle.”

Genworth’s analysis also raised concerns that despite the increase in number of deals available lending at 90 per cent to 95 per cent LTV is actually in decline.

There was £1.61bn lent through 90 per cent to 95 per cent LTV loans in the third quarter of this year, down by more than a quarter from the £2.20bn lent over the same period in 2014.

Mr Crone said it was clear from the chancellor’s Autumn Statement that more needs to be done to help people get a first foot on the property ladder.

“However, these should not come at the expense of using mortgage guarantees or insurance to ensure wider access to high LTV mortgages,” he said.

“The government scheme has had a positive impact over the last few years and it is dangerous to assume that this would continue without any other scheme in place that incentivises lending and manages risk at the same time.”