High Loan To Value loan Ratios Are Back On The Books
Since the beginning of the credit crunch last year, we have seen mortgage and home loan providers withdraw the vast majority of their products from the market and severely tighten the lending criteria imposed on those which remain.
One of the biggest casualties in this area has been the high loan to value ratio mortgages, which have been extensively used by first time buyers with a very low deposit and those who have consolidated their credit card and personal loan debts through a re-mortgage.
Many of these individuals have previously taken out a short term fixed or discounted home loan and now that they have reached the end of their initial cheap rate period, are stranded on their existing lender’s standard variable rate, as most providers will only offer a maximum loan to value of 75 or 80 per cent.
Over the course of the last couple of months, there has been a slight relaxation in lending criteria as the cost of borrowing money on the wholesale market has got cheaper and lenders are slowly starting to lower their interest rates and also return to higher loan to value products.
Both the Cheltenham and Gloucester and Yorkshire Building Society have joined the small group of lenders who are prepared to offer up to 90 per cent loan to value, both for those looking to buy a house and also re-mortgage customers.
Both lenders have said that they are still taking a cautious attitude towards the high loan to value lending, but feel that due to their financial strength, funding the majority of loans from their own funds rather than borrowing, they are in a strong position to offer competitive deals.
These two mortgage loan providers now join lenders such as Abbey and the Halifax, both of whom still offer up to 95 per cent loan to value for selected customers and there is interest being shown from other lenders such as the Nationwide, who are likely to return to this sector of the market at some point in the future.
This is, as yet, only a small step and it is likely to be some time before confidence fully returns to the mortgage loan market, nevertheless it is a positive move and has to be good news for the housing market in general.
