Haresnape: Osborne’s talking sense on high LTVs
Speaking from a construction site Osborne defended the government’s Help to Buy Scheme from critics who have speculated there are new risks emerging in the housing market.
He said: “This debate would benefit from a little less assertion and a little more examination of the evidence.
“90% and 95% LTV mortgages are not exotic weapons of financial mass destruction – they are a regular part of a healthy mortgage market and an aspirational society.”
Osborne pointed out that Help to Buy mortgages will all be repayment mortgages not interest-only so borrowers will rapidly build up a larger equity buffer within just a few years even in the absence of any house price growth.
Charles Haresnape, managing director residential mortgages at Aldermore, said the Chancellor was talking sense on higher LTV mortgages.
He said: “It’s good to hear the Chancellor talking some much needed common sense about higher LTVs in the mortgage market. Lenders should be able to provide 90% to 95% loans without onerous conditions attached.
“At the moment these loans are pretty difficult to qualify for but as long as the borrower can afford the repayments there shouldn’t be an issue.”
Haresnape said it was time to ditch the stigma attached to high LTVs and focus on customer affordability which, he said, is the focus of most lenders who take a common sense approach to underwriting.
Critics of the Help to Buy scheme have said it will boost demand but not supply but Osborne refutes this claim and said there is evidence to the contrary.
Osborne said the government’s planning reforms have already increased the flow of new planning permissions but the lack of mortgage availability at higher LTVs has itself been one of the biggest factors holding back the supply of new housing.
He said: “That’s why a report last week by former Monetary Policy Committee member Charles Goodhart, now at Morgan Stanley, estimated that Help to Buy could increase housing starts by more than 30% between 2012 and 2015.
“So the evidence suggests tentative signs of a balanced, broad-based and sustainable recovery, but we cannot take this for granted.”