High loan-to-value mortgages hit biggest share since 2008: "The Government needs to take action fast"
HIGH loan-to-value mortgages have hit their biggest share since 2008, new figures show.
The share of gross mortgage advances with loan-to-value (LTV) ratios exceeding 90% has hit its highest point since 2008, new FCA data reveals.
The proportion of lending to borrowers with a high loan to income (LTI) ratio decreased by 3.7pp from the previous quarter to 41.5%, the largest decrease since 2023 Q1, and was 1.0pp lower than a year earlier.
New arrears cases (as a proportion of total outstanding balances with arrears) decreased by 0.4pp from the previous quarter to 8.8%, the lowest since 2022 Q1, and was 2.2pp lower than a year earlier.
The value of outstanding mortgage balances with arrears decreased by 1.0% from the previous quarter to £20.9 billion, the lowest since 2023 Q4, and was 4.6% lower than a year earlier.
Michelle Lawson, Director at Fareham-based Lawson Financial, said the government needs to take action.
She added: “When you see figures like this and the property market is still not igniting, you know the problem isn't to do with lending. There are multiple product options, including 100% borrowing, yet this is still stalling.
"The Government need to take off the blinkers and take stock and make positive action fast. People over-extending their borrowing could cause a greater problem although the banks are much better placed liquidty-wise since the 2008 crash.”
Babek Ismayil, CEO and founder of home-buying platform OneDome, said the figures show resilenece in the housing market.
He added: “It’s striking that high loan-to-value mortgages have climbed to their highest share since 2008. This shows first-time buyers are determined to get on the ladder, even with affordability challenges.
"While borrowing at higher LTVs carries more risk, it also underlines the strong demand and resilience in the housing market. Combined with falling arrears, it suggests buyers are carefully managing their finances while chasing opportunities.”
Ranald Mitchell, Director at Norwich-based Charwin Mortgages, agreed that the figures are a sign of the housing market being resilent.
He said: "First-time buyers and home movers are clearly finding more opportunities, with high loan-to-value mortgages reaching their strongest share since 2008. At the same time, lenders are showing discipline on affordability, with fewer borrowers stretching to high income multiples.
“Encouragingly, arrears are falling, signalling that most households are managing the cost of borrowing despite wider pressures. The combination of rising low-deposit lending and falling arrears points to a market that is both more accessible and more resilient than many might expect, enabling many to acheive their housing ambitions.”
Laura Purkess, Personal Finance Expert at Investing Insiders, said the figures show just how tough it is for young people to get on the housing ladder.
She said: "This data sums up the affordability issues in the housing market and the wider economy at the moment. People are borrowing with the highest possible loan-to-values because house prices and mortgage costs are far higher than five years ago, but wage growth has not kept pace with those rises.
"It's very difficult save a minimum deposit for most people on an average income in the current climate, let alone a larger one to bring down their LTV. The average house price across the whole of the UK is £270,000, according to Zoopla.
“On a typical £35,000 salary, you're looking at being able to borrow up to £175,000, mortgage calculators suggest, meaning you'd need almost £100,000 as deposit to afford a typical house as a single buyer. This is only going to worsen in areas with higher house prices.”
Aaron Strutt, Product and Communications Director at London-based Trinity Financial, said first-time buyers in particular need higher LTVs.
He said: “First-time buyers in particular need the lower deposit mortgages to help them get on the property ladder, especially with house prices being so unaffordable in many areas. Borrowers need to have good credit scores to get these low deposit mortgages so they are not that easy to qualify for.
"It is really interesting that despite so many lenders offering income stretch mortgages, fewer borrowers are taking them. The lenders have really been pushing them over the last six months.
"West Brom has just raised their maximum mortgage income multiple to 5.75 times salary, and HSBC has eased its criteria to start offering 5.5 times salary, particularly to more first-time buyers. Nationwide is the biggest player in the income stretch market at the moment.”
Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, said people
He continued: "There are a few contributing factors for this. Cost of living and higher rents have made it much harder to save deposits, affordability has tightened so people can’t borrow as much and buy bigger properties.
"The increase in buying fixer uppers and property with possibility to extend means they hold back money and put the minimum down.
"There is also less incentive to put higher deposits down. In years gone by the interest rates would be significantly better for bigger deposits. Now the difference is minimal and people would rather have a larger rainy day fund during these tricky times.”
