Data from the latest Bank of England (BoE) credit conditions survey showing a renewed appetite over the past year for lenders to advance loans at higher loan-to-value (LTV) ratios, suggests access to the mortgage market has been widening.
According to the Council of Mortgage Lenders, this has partly been encouraged by the introduction of government support measures such as the help-to-buy mortgage guarantee scheme.
The BoE survey was published in January, and it reported that spreads were narrowing and firms were showing a strengthening desire to build market share.
The survey revealed overall that credit quality remained good, with the bank reporting that both default rates and losses given default on mortgages had fallen significantly in the final quarter of last year.
Data from the survey also showed mortgage rates had fallen significantly over the past year – with the largest falls available to those wanting to take out longer-term fixed-rate mortgages.
Over the year preceding November 2015, the weighted average 10-year fixed-rate loan, at 75 per cent LTV, had reduced by 70 basis points to 3.34 per cent.
Across the same period, the bank recorded lower rates for almost all types of loans, with a two-year fixed mortgage 27 basis points (bps) lower at 1.9 per cent.
In comparison, a survey published recently by Moneyfacts, which looked at mortgages at different LTV ratios, showed that the largest reductions in advertised rates had been for borrowers seeking higher LTV mortgages.
The survey found that, in the 12 months to January 2016, average rates fell across the board, with the largest reductions, of almost 80bps over the year, on 90 per cent mortgages.
Average fixed rate mortgages
| January 2015 | January 2016 | Size of reduction | |
| Average two-year at 60% LTV | 2.07% | 1.99% | 0.08% |
| Average two-year at 75% LTV | 2.85% | 2.16% | 0.69% |
| Average two-year at 90% LTV | 3.84% | 3.06% | 0.78% |
| Average five-year at 60% LTV | 2.97% | 2.66% | 0.31% |
| Average five-year at 75% LTV | 3.25% | 2.94% | 0.31% |
| Average five-year at 90% LTV | 4.56% | 3.79% | 0.77% |
Source: Moneyfacts
Adviser view
Andrew Montlake, director at London-based mortgage broker Coreco, said: “We are definitely in a much better place in the mortgage market than we have been for many a year, with lenders starting to slowly expand their criteria to help more borrowers.
“While there is still some work to do in certain areas, such as dealing with mortgage prisoners and lending into retirement, there has been some movement in higher loan-to-value borrowing and lending to the self-employed.
“What we need to do better as an industry is publicise this fact so that prospective borrowers are not put off the mortgage process before they have even begun.”
ruth.gillbe@ft.com
