High LTV mortgages now account for one in five of all new mortgages

Graham_Devon

A "glut" of mortgage deals aimed at buyers with small deposits pushed the number of homeowners vulnerable to a slump in property prices to a post-crisis high in June, according to the UK’s biggest chartered surveyor.

The number of households that took out mortgages with deposits of 15pc or less of a property’s value rose to 10,898 in June, up from 9,750 in May and 7,166 a year ago, according to e.surv.
This means that high loan-to-value (LTV) lending now accounts for one in five of all new mortgages, the highest level since April 2008. This compares with just one in nine mortgages a year ago.

The e.surv data also revealed a prominent north-south divide in high LTV lending in June. More than a quarter of borrowers in the North West and Yorkshire took out high LTV loans, compared with just 7pc in London. It said lower wages in these regions meant an increasing number of borrowers were struggling to save for a deposit.

However, it is noted in the article that even though the risk factor here is high, it's not as high yet as it was in the crisis of 2008 and that these mortgages "help keep the dream of home ownership alive".

So what the article seems to be saying is that yes, the risk is growing, and rapidly, but it's OK, as it keeps dreams alive and it's not yet at crisis levels.

So should be an article we can all agree with in places!

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10957976/Mortgage-deals-leave-thousands-vulnerable-if-house-prices-fall.html

HAMISH_MCTAVISH

It's one in five of all new mortgages, not all mortgages.

And that just means the mortgage market continues to recover from it's previous dysfunctional state. Still a long way to go though.

Also interesting to note that just 7% of new London mortgages are at greater than 85% LTV, versus 27% of new mortgages 'oop north'....

CLAPTON

which risk factor?
what does it say about affordability and risk of a default on mortgage payments?

Rinoa

The article doesn't clarify whether the deposit includes the 'help to buy' element or not. The whole point of 'help to buy' was that it made house purchase more accessible to more people.

Good to see it working so well.

Graham_Devon

HAMISH_MCTAVISH wrote: »

It's one in five of all new mortgages, not all mortgages.

True, edited the title.

System

HAMISH_MCTAVISH wrote: »

Also interesting to note that just 7% of new London mortgages are at greater than 85% LTV, versus 27% of new mortgages 'oop north'....

I had a chuckle at that. All that "reckless" lending where house price rises are lowest. Ouch.

wotsthat

Graham_Devon wrote: »

However, it is noted in the article that even though the risk factor here is high, it's not as high yet as it was in the crisis of 2008 and that these mortgages "help keep the dream of home ownership alive".

The article didn't note that the risk factor was high.

Anyway, since when has an 85% mortgage been considered the start point for defining a high risk mortgage.

Percy1983

I thought they where impossible to get below 80%?

I wouldn't high LTV always points to high risk.

In our case we got in at the impossible 90% LTV, but we can support the house fully on a single wage if needed (probably one of the reasons we got accepted for the impossible to get mortgage).

Yes the risk of negative equity is higher, but if the value of my house goes up or down I won't be any richer or poorer so I will just continue to pay the mortgage so negative equity could only ever be a temporay non problem at worse.

mayonnaise

Percy1983 wrote: »

Yes the risk of negative equity is higher, but if the value of my house goes up or down I won't be any richer or poorer so I will just continue to pay the mortgage so negative equity could only ever be a temporay non problem at worse.

When you come up for remortgage, how much do you think the difference will be between let's say remortgaging at 90% or higher LTV and remortgaging at let's say 70% or lower LTV?

Percy1983

mayonnaise wrote: »

When you come up for remortgage, how much do you think the difference will be between let's say remortgaging at 90% or higher LTV and remortgaging at let's say 70% or lower LTV?

I took out a 25 year mortgage so will I ever have to remortgage?

If a better deal comes along great, if not I stay put. As you are getting at prices going up/down will effect potential future deals but as we can afford the current deal with a base rate of 27% I am not too worried if I end up 'stuck'.

Will just deal with what happens as/when it does as the rest is out of my control.

Thrugelmir

While the current levels are below those seen pre-crisis, when the number of high LTV loans reached 41,745 in February 2007 – or one in three loans – it means a growing number of households are at risk of falling into negative equity should prices fall sharply.

Article totally fails to recognise the point that new mortgage lending has switched from interest only to repayment since then. So over time borrowers will repay the capital balance. Negative equity isn't the end of the world that the article is suggesting.