The scarcity of high LTV mortgages has been well documented in recent weeks. Data from Moneyfacts shows that between 1 June and 1 July 2020, the number of deals available at 90% LTV fell from 183 to 70. While the number of deals available at 95% LTV fell from 31 to 14 during the same period. To put this in in some context, at the beginning of March, there were 779 products available at 90% LTV, and the 70 products quoted by Moneyfacts in its report beats the previous low of 71 products in May 2009.
The problem it seems, it not so much a case of lending appetite by the big lenders in this part of the market, but a combination of some lenders pulling back and high customer demand, which has put serious operational demands on those lenders that have continue to serve the high LTV market leading to lenders pulling products to manage their service levels. And this pattern has filtered down to the 85% LTV market and even, to some extent, the 80% LTV market.
The impact of this on homebuyers has been well-discussed, but perhaps less well-known is the impact it is having on your clients who are looking to capital raise. This group faces a number of challenges. Many lenders have pulled back from offering further advances and on remortgages there are fewer options at higher LTVs. Couple this with a property market where surveyors are taking a conservative view on values and homeowners’ options to raise money through remortgaging becomes much more limited.
This is at a time when, having been stuck at home for more than three months, and with many people missing holidays, appetite to carry out home improvements is booming. The Kingfisher Group, which owns B&Q and Screwfix amongst others said that its Q2 2020 like for like sales increased by nearly 22% on the same period last year.
So, with the growing appetite for home improvements at odds with a narrowing opportunity for homebuyers to raise extra funds on their first charge mortgage, what are your options?
The second charge market continues to present opportunities to capital raise at higher LTVs. In fact, in the right circumstances, there is a product available that can lend at 110% LTV, and the market is becoming more competitive elsewhere.
We have seen reduced credit score requirements, providing greater acceptance rates on residential second charge applications up to 95% LTV. Furlough income can be considered on a case by case basis, and in such cases we can use 80% of clients’ income to a maximum of £2,500/month, and we can also consider any evidenced employer top-up in addition. Other lenders have re-introduced products at 80% and 85% LTV.
These high LTV options are ideal for people looking to carry out home improvements where they will be increasing the property value, but they can also be taken for a range of other uses.
High LTV lending may be sparse in the first charge market, but don’t forget that there is still opportunity when it comes to second charge mortgages.
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