95% LTV lending in decline

Ryan Bembridge

September 12, 2016

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Lending at 95% loan-to-value is declining as a share of overall mortgage lending, the AmTrust Moneyfacts LTV tracker has revealed.

In the first quarter of 2016 95% LTV lending accounted for just 2.5% of the market, falling from 4.2% in the second quarter of 2014.

The number of available mortgages with a 5% deposit has fallen from 249 in July to 238 in August 2016, as Brexit has made it harder for first-time buyers to join the property ladder.

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With the average cost of a first-time buyer home reaching a record £161,912 in June, Simon Crone, commercial director of AmTrust International, mortgage and special risks, reckoned the Brexit vote has harmed young buyers.

He said: “In the wake of uncertainty caused by June’s vote for Brexit it is concerning, but perhaps not surprising, to see the number of available products for those with small deposits going into decline at a time when lender appetite for risk looks set to decrease.

“The availability of loans for those with small deposits received a much needed boost when the government introduced the Help to Buy mortgage guarantee scheme, yet – while mortgage lending is increasing – lenders appear increasingly focused on lending to borrowers with greater deposits.

“This suggests that Brexit may not be as good for first-time buyers as initially thought.

“Despite the lower interest rates available, house prices continue to rise and a lack of appetite for high LTV lending will take its toll on first-time buyers.”

The Help to Buy mortgage guarantee scheme is set to expire on 31 December 2016, which Crone reckoned will exacerbate fears that homeownership levels are in long-term decline.

He added: “Failure to support first time buyers will impact the wider housing market by preventing people from moving up the housing ladder.

“It is clear that a long term solution is needed. Greater encouragement of high LTV lending as well as bespoke options to keep on supporting first time buyers that aren’t able to rely on parents for help with a large deposit.

“Private mortgage insurance is proven to be an effective tool at encouraging high LTV lending while also protecting the taxpayer, keeping risk down – of particular importance in the post-Brexit world – and maintaining high lending standards.”

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