View more on these topics

Guarantee is irrelevant for pricing of 100% LTV deal, says Aldermore

CHARLES HARESNAPE – HIGHER CAPITAL IS NEEDED

Aldermore has defended the rate of the 100% LTV mortgage it launched last week.

The lender’s three-year fix at 6.48% available up to 100% LTV requires the loan amount above 75% LTV to be secured on a parent or grandparent’s property.

Many brokers claim the rate is too high because the guarantee on the second property means Aldermore is only taking on the risk of a 75% LTV deal rather than a 100% LTV one.

But Charles Haresnape, managing director for residential mortgages at Aldermore, says the guarantee cannot be taken into account when pricing the product.

He says: “The guarantee gives us extra security on the overall risk of the product, but when it comes to pricing, we have to look at the LTV we are lending which is 100%.

“Any mortgage above 80% LTV requires higher capital from the lender, which in this case cannot be offset by the parental guarantee so high LTV deals have to be priced accordingly.”

David Sheppard, managing director of Perception Finance, argues that the mortgage is not true 100% LTV lending because he says it effectively takes a second charge loan on another property. He adds: “I do not think there will be a huge take-up of this product, partly because of the high rate. But it is good to see Aldermore

bringing innovation to the first-time buyer market.”

And David Hollingworth, mortgage specialist at London & Country, says: “This product opens up the market to those struggling to save for a deposit. It could put borrowers at risk of negative equity if house prices continue to slide, but it would be less of an issue if they were planning to stay in the property for a long time.”

Recommended

The Mortgage Mole

Swingball Success Having repeatedly appeared in Mortgage Strategy’s caption competition Mole thought he’d give Bob Young, managing director of CHL Mortgages, a break this week. But the picture (right) of Young and CHL staff breaking the Guinness World Record for most people playing swingball was just too good not to use. In a blockbusting bat […]

S&P upgrades HML

HML, has been awarded an upgrade to Above Average for its special servicing by Standard & Poor’s, which means no other UK servicer holds a higher rating for primary or special mortgage servicing.

Europe: why persist with value today?

By Rob Burnett, Neptune’s Head of European Equities The Neptune European Opportunities Fund remains committed to a value bias. We see a broadening array of opportunities in diversified industries at compelling valuations today. The most complicated part of the market is the European banks. We are currently overweight in this sub-sector as many banks are […]

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments
  • Post a comment
  • Tom Cleary 13th September 2011 at 3:33 pm

    This is a good deal for Aldermore. They actually get 125% security. However, if you have clients with parents that are prepared to secure a charge against their property, you can arrange your own 100% lending for them by applying for a 75% purchase with the additional 25% raised on the parents property. The new mortgage will certainly be more competitive than 6.48%…

  • Anon 13th September 2011 at 2:16 pm

    Don’t the Tipton have a 2 year fixed at 6.69% that works in the same way……

  • Anon 13th September 2011 at 2:16 pm

    Don’t the Tipton have a 2 year fixed at 6.69% that works in the same way……