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High LTV lending

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 20. December 2022

Looking to get mortgage broker views on high LTV lending. 

  1. What is product choice for high LTV loans like currently? Has it returned to pre-pandemic levels? 
  2. What are the challenges first-time  buyers face looking for a high LTV loan currently?
  3. Do you think it could become more competitive in the next year with more products? If so why or why not? 
  4. What is your advice to anyone looking for a high LTV mortgage currently?

8 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
The number of high-LTV products has been shrinking for the last 4 or 5 months, as lenders were already adjusting to both the withdrawal of the Mortgage Guarantee Scheme and the predicted property price trends. A few lenders have removed support to 95% mortgages in the last few weeks. Indeed, the number of high-LTV products is significantly lower than pre-pandemic, as concerns about rising mortgage rates and property value uncertainty hit the market.

With the government likely to renew the Guarantee Scheme, this may encourage lenders to stay in this important market, supporting First Time Buyers in particular, and offer some reasonable rates, but with typical rates likely to settle around 4%, those with a small deposit will pay at least 1-1.5% more. For anyone buying with a small deposit, haggle hard on the purchase price!
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Mike Staton
Director at Staton Mortgages
It is clear that there are more products available with a higher deposit, this is not a new fascinating fact, its always been this way. Some lenders just dont have the apetite for risk that comes along with high LTV mortgages. For example, buying a £200k property today with a 5% deposit would get you a 5.79% fees free deal which would cost you £26703 over the 2 year fixed period. The equivelant property with a 20% deposit would bag you a 5.25% fees free deal costing £21186 over the 2 year fixed period. However, there are nearly 6 times more mortgages available at 80%. Traditionally the market is slower in december so i expect to see an increase in mortgage availability as we come into the new year, especially with the extension of the Mortgage Guarantee Scheme. If you are hoping to get a mortgage, make sure you speak to a local advisor
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Benjamin Blyth
Director at Houz Mortgages
There are currently around 260 mortgage products available for 95% LTV from a range of 35 lenders. This is quite a healthy mix although not yet back to pre-pandemic levels. Almost two-thirds of these are fixed-rate options. The current challenges lie around location and credit scores. Some lenders only offer high LTV mortgages locally whilst some have higher credit score thresholds for higher LTV applications. Negative information on credit history will be a barrier but a credit score could be low simply due to being new to using credit or having limited history, not necessarily 'bad' data. This should never be an issue as a few of these lenders don't have a score threshold to meet. My advice is to provide your broker with a full credit report and be prepared to discuss the contents as this will help to identify the right lender.
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James Miles
Director - Mortgage Adviser at The Mortgage Quarter
High LTV mortgages are a tape of a double-sided blunt sword. Income multiples are reduced due to the risk to the lender so achieving the right of lending is proving difficult. Lenders are wary of house prices dropping so competition at 95% LTV has become more sparse. However, if a borrower can afford the payments it’s still a good time to buy a property if you’re happy to ride out uncertainty for the next couple years. Get in, settle, improve your home and start your climb up the property ladder.
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Matthew Jackson
Director at Mint FS
Whilst not quite back to pre pandemic levels the choice for High Loan To Value mortgages is still comprehensive with a mix of high street lenders and regional building societies offering products. These have been partially baulked out by the Governments Mortgage Indemnity Scheme - which will not be in place indefinitely.

Post pandemic lenders strengthened their internal scorecard requirement to pass for high loan to value mortgages and typically reduced potential borrowing to 4.49 x provable income - making it both more difficult to obtain a mortgage with a small deposit and reducing the amount that can be borrowed.

Lenders will no doubt be competing for a share of the first time buyer market in 2023 , with transactions contracting this will be a much more competitive space meaning more choice and potentially better products
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
High LTV or small deposit lending is and always has been the higher-priced end of the market, due to the additional risk of even a small house price reduction. However, rates are coming down as unease following the disastrous mini-Budget dissipates, but they're not going to return to the lows we have seen in the past few years. We're not in that market anymore and may never be again. Many people will have very heated debates about whether to buy or wait, but my take on it is simple: if you can afford it and want to buy a new home then do it. You are likely going to be there so long that the price you originally paid will be a distant memory and immaterial in the grand scheme of things.
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Gary Boakes
Director at Verve Financial
With the mortgage guarantee scheme ending on the 31st December 2022 as it stands, and lenders being wary of offering 2-year fixed rates with the talks of price drops next year, the market for higher LTVs has certainly become restricted over the past few months. Combining this with affordability being restricted and harder internal scorecards it is certainly going to interesting few months for higher LTV borrowers.
According to local estate agents, FTB are the most active in the market, so I'm fully expecting in Q1 that the lenders will be making changes to increase their transaction numbers when we see some stability in rates.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
Getting a 95% mortgage back in 2019 was not difficult, but this dropped drastically during the pandemic, and although some lenders have returned to the market it's not as prevalent as it was back in 2019. Currently, there is a lack of products on offer for high LTVs so making sure the clients fit with these lenders' requirements can be more challenging. Higher rates can also make it challenging to meet affordability calculators taking into account the large monthly payments.. I hope the market gets more competitive but I am not too hopeful that these products will increase hugely for a while yet unless we see further rate drops of a housing market boom. Speak to a broker, get in as much overtime as possible and reduce any unnecessary spending to give yourself maximum borrowing.