Higher Loan-to-value Mortgages are Back!

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Added on July 9th 2020

First-time buyers could be in clover this year after several banks reintroduce high loan-to-value (LTV) mortgages.

When the covid-19 lockdown was first announced, many lenders stopped offering mortgages to anyone looking to borrow more than 75% of the value of the property. Just recently, however, lenders have reintroduced these high LTV deals for borrowers with smaller deposits.

New Nationwide customers can apply to borrow up to 95% of the property’s value and Clydesdale/Yorkshire Bank has reintroduced first-time buyer mortgages for up to 90%.

The financial website Moneyfacts.co.uk says that the number of two-year fixed mortgages for people with a 10% deposit rose from 24 products in May to 55 in June. Anyone with a 15% deposit can choose from 116 products in June, rather than just 87 in May.

For people with a smaller deposit – 5% or so – there are only a few options, however, with just six two-year fixed home loans available and nine five-year fixed rate mortgages.

House-hunters are out of lockdown

In terms of looking for a new home, anyway. As people get back to work, they’re resuming their hunt for a new property and the market should react with offering more options for borrowers with smaller deposits.

Mortgage lenders reduce their rates

Some lenders have also lowered their fixed interest rates recently, which will make buying that first home even easier. Nationwide reduced its two-year fixed rates for LTVs of up to 90% by 0.15%, for example. The average rate for a two-year fixed deal, in June, for a first-timer with a 5% deposit is 3.28%. A 10% deposit gets a lower interest rate of 2.30%

Buyers can expect some delays with valuations

Lenders will have a massive backlog of valuations to get through as lockdown lifts. At the height of lockdown, valuations were put on hold. Some valuations, for lower LTV mortgages, were eligible for automated processes, but higher LTVs – 95% or so – needed to have a surveyor visit the property in person. HSBC is offering automated valuations for buyers and remortgaging customers with an LTV of 90%.

This backlog might take a few weeks to work down, especially if some surveyors were furloughed by their employers.

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