Mortgages  

Half the nation want 100% LTV mortgages back

Half the nation want 100% LTV mortgages back

Almost half of the population are in favour of reintroducing 100 per cent loan-to-value mortgages as a means to helping first-time buyers into the housing market.

A YouGov survey of 9,713 adults in the UK revealed 48 per cent believed reviving 100 per cent LTV mortgages was a "good idea", 32 per cent thought it was a "bad idea" and 20 per cent "did not know".

The survey followed a suggestion by the Building Societies Association (BSA) that lenders should "revisit the case" for 100 per cent mortgages, where a borrower would not require a deposit, to help the younger generation get on the housing ladder.

The trade organisation’s report found most underwriters in the sector were not "philosophically averse" to 100 per cent LTV lending, but the associated risk was well appreciated.

The calls to reintroduce the controversial mortgage have been met with industry scepticism, with one commentator calling the loan type an "old financial services pantomime villain".

Of the 18 to 24-year-old respondents to the YouGov survey, 46 per cent responded positively to the prospect of a 100 per cent LTV mortgage and 22 per cent believed it to be a bad idea.

Danny Belton, head of lender relationships at Legal & General Mortgage Club, said he believes the rationale behind the return of 100 per cent loan-to-value (LTV) mortgages is interesting but added it is not the solution to the current issues facing first-time buyers.  

He said: "At the very least it would mean lenders would have to significantly increase the amount of capital they would be required to hold, which is just not sustainable.

"What would be more beneficial is for more buyers to utilise schemes such as shared ownership and Help to Buy or even make use of guarantor mortgages."

Mr Belton said the industry does need more innovation and praised the launch of Cambridge Building Society's 98 per cent LTV 'First Step' product.

He said: "We need to help those buyers currently in rental accommodation who would pass the affordability checks, have a good track record of making rental payments, but are struggling to raise a deposit for their first home.

"This niche market is only going to grow in the coming years, but 100 per cent LTV mortgages are not the answer to challenges facing younger buyers."

rachel.addison@ft.com