Why it is so hard to get a high loan-to-value (LTV) mortgage

High loan-to-value (LTV) mortgages of more than 85 per cent disappeared early on in lockdown due to the inability of surveyors to visit property and carry out valuations. This was never a liquidity problem, more a logistical one. Lenders had the money to lend but require a valuation to ensure that the security they are lending on is worth what the buyer wants to borrow.


Lockdown put paid to that, with lenders forced to rely on desktop valuations instead. But while these may be acceptable on low LTVs, they are not suitable for high LTV mortgages due to the higher level of risk. This meant most lenders, with the notable exception of HSBC, pulled out of the high LTV market, with many refusing to lend more than 85 per cent LTV and adding other restrictions such as reduced maximum loan size.


The good news is that these lenders slowly returned to the market as lockdown restrictions eased and valuations could be carried out again, with Accord, Virgin Money and Clydesdale all returning to 90 per cent LTV from mid-May.


However, it is not all plain-sailing. While a number of building societies are also offering 90 per cent LTV, there is still not enough capacity from lenders to meet borrower demand. Subsequently, Accord, Virgin and Clydesdale have once again pulled their 90 per cent LTVs in response to a higher-than-expected volume of applications.


This is not surprising. Given the difference between house prices and incomes, saving for a deposit of more than 10 per cent is a struggle for many buyers, particularly those who can’t rely on the Bank of Mum and Dad. With so few lenders offering 90 per cent LTV deals, those lenders who are offering them are inundated with business. One way of coping with that demand is to temporarily withdraw, as is the case with Accord, Clydesdale and Virgin, until they have dealt with the backlog of applications.


This means the range of lending options at high LTVs is still restricted but it won’t always be that way. Professionals and other first-time buyers should seek advice from a whole-of-market broker such as AWS Financial Services to find out what is available for their particular circumstances. Please get in touch for more information. ends

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