FTBs adversely affected by banks lowering LTVs to 60%

Jake Carter

March 27, 2020

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First-time buyers will be adversely affected due to banks lowering their maximum LTV to 60%.

This area of the market is the most money strapped, and therefore banks increasing the minimum deposit from 5% to 40% will drastically affect them.

Vadim Toader, chief executive of Proportunity.co, said that increasing the minimum deposit from 5% to 40% would quash any chance of home ownership for FTBs.

Furthermore, many potential FTBs are in situations where “they need to buy”, such as couples expecting babies.

Toader, said: “We understand that these are uncertain times and lenders need to practice caution, but to crush their dreams in a time of on-going crisis is just cruel.”

Furthermore, Kat Tymon director at Mansfield Money believes that lenders are protecting themselves by lowering the maximum LTV to 60%.

With valuers and surveyors unable to physically visit properties, this is having a huge affect on mortgages as the lender needs to be confident they are lending on a suitable property and their interest is secure.

As a result, lenders are turning to desktop and electronic valuations on residential purchases and remortgages, however, a lot of BTL lenders are unwilling to do this on BTL properties, Tymon added.

Tymon said: “By reducing the products available to 60% LTV, this means with an electronic valuation the lender can be sure they are sheltered from an improper valuation figure.

“Brokers are affected as it is restricting their business and an existing lender product switch may be the only option for some clients when looking to remortgage during lockdown.”

Mike Brown director of Crystal Clear Financial Services takes a positive outlook, he said that for lenders who have “continued to offer a proposition, albeit to 60%, then this is great news and not as sweeping as removing everything.”

Brown also points to lenders balancing risk as to why they have reduced the minimum deposit.

He said: “Lenders have to balance risk with the tools they have to assess cases in the absence of physical valuations, and at some point we will see the LTV’s increasing again.

“What is disappointing is that lenders who restrict the broker market to 60% but still offer higher LTV’s direct.”

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