High LTV, remortgage in Sept & possible house price falls

James_H

More of a question for brokers here as to what they think could happen in the next few months if house prices begin to dip for early application cases.

My sister's mortgages is coming to the end of its initial fixed rate period this September. The original deal was for a longer term than 25 years and quite high (though not above 100%) LTV.

Before anyone chips in with it, I am going to suggest she goes to a WoM broker (as she did originally) because the high LTV and relatively stretched affordability will mean experience of which lender is likely to accept will be invaluable here. My suggestion is to meet ASAP to find a decent deal before they dry up completely. I'm aware that many lenders will let an accepted offer hold for a few months, to complete after the current ERC period ends.

However, the usual practice is to proceed with the application at normal pace, with the valuation occurring relatively early on. If the application was made now, this could mean a valuation this month or next. I don't know the rough LTV (and of course the actual valuation LTV could be different), but say if it was 89% now and a max 90% LTV product is chosen, it could quite easily be above 90%, or even above 95% or possibly 100% if the doomsayers prophecies come true by September.

I realise this is the reason for lenders cutting their max LTVs now, but does anyone think it it could mean any adverse consequences depending on how far down the application process you are? For example, the lender wanting to redo/adjust the valuation further down the line, or declaring that the LTV is now too high for the original offer to go ahead?

Another question I haven't been able to find a definitve answer for by searching is at what stage does withdrawing a deal affect potential borrowers? If the application is approved in principle and submitted, but the lender withdraws the product the next day (for example Abbey with its 100% LTV deals tomorrow), how does it leave potential borrowers who applied for that product?

Thanks, James.

chappers

I'm not abroker but I think some people will have no option other than to remortgage early and take the ERC hit.
If your house starts falling in price and you have adeal ending in 18 months time, by this time you could find yourself in negative equity and unable to remortgage if you can't afford the SVR your only option may be to get out eraly and take a longer fix whilst you still have the equity in your property.

Its all a difficult one to call and I wouldn't want to be having to make those sorts of decisions.