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Will the gap between the rates offered to those with high and low LTV widen?

Journalist: Callum Mason, i

ended 05. August 2023

Cheaper mortgage rates are always available to those with lower LTVs, however, with house prices forecast to drop in the coming year, and lenders looking to protect their investment, is it likely the gap between the rates offered to those with low LTVs and high LTVs will widen in the coming months?

Will this make it harder for FTBs to get on the housing ladder unless they can get together large deposits?

3 responses from the Newspage community

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Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
There is no doubt that higher loan-to-value mortgages are presenting as a higher risk over the next 12 months than they did previously. As house prices flatten and start to reduce, even if by less than previously thought, 5% and 10% deposit mortgages will become more expensive to mitigate the risk. Higher rates will also be used to reduce the amount of higher LTV mortgages in the lenders' loan book mix. Naturally, First Time Buyers will be the most impacted by this, making it again harder for them to get on the property ladder due to the monthly payments or requiring a larger deposit.
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Editor
Emma Jones
Managing Director at Whenthebanksaysno.co.uk
They need to widen in the next few months the gap between different LTV products. There needs to be an incentive for mortgage holders to put down a larger deposit to secure a better deal. This is less risk for the lender and the client, it should be incentivised again, as they were.
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Graham Cox
Director at Bridging Hub
Lenders, like any business, mitigate risk by choosing who they do business with carefully. So in a falling market, it's likely that first-time buyers or anyone with a small deposit will be penalised disproportionately in terms of the mortgage rate they pay.

Some will simply try to cherry-pick 'safe bet' customers - those with large deposits or equity. That said, all lenders need a steady supply of first-time buyers to keep the market buoyant, so some may take a more sanguine view.