The comment was made by Ian Pearson, under-secretary of state for business, enterprise and regulatory reform, at a recent House of Commons debate.
Pearson’s remarks were in response to a question from Gordon Banks, Labour MP for Ochil and South Perthshire.
Banks says: “Most products now demand large deposits of up to 30% but why? Could it be that lenders have individuals’ best interests at heart and want to ensure they can cope with their repayments? I don’t think so.
“I believe they are protecting their backs against a further fall in house values.”
He adds: “The solution is simple. We must return to widely available 90% LTV mortgages if we are to have any hope of saving the industry.”
Banks went on to ask Pearson why state-owned lender HBOS has only been lending at 80% LTV on new-build properties since the beginning of the year.
Pearson says: “The government has made it clear that it wants to see a mortgage market that functions well, where lenders lend responsibly and borrowers have access to a wide range of mortgages that they can afford to repay.
“I share the ambition to see more 90% LTV mortgages being offered.”
Pearson says there are 90% LTV mortgages available but the government should think about what else it could do to help first-time buyers get a foot on the housing ladder.
Meanwhile, figures released by Moneyfacts show two lenders are still offering 100% LTV mortgages.
Tipton & Coseley is offering 100% LTV deals but restricts lending to just four postcode areas in the West Midlands and a parent must act as guarantor.
Northern Bank, which only lends to borrowers in Northern Ireland, is also offering 100% LTV deals. Just three lenders are offering 95% LTV products – Abbey on a five-year fixed rate and National Australia Bank-owned Clydesdale Bank and Yorkshire Bank on first-timebuyer products.
The figures also show that more than two-thirds of the 1,485 mortgage deals on the market require deposits of at least 25%.
Overall, the number of mortgage products available as of April 6 had increased from 1,398 in March to 1,485. But the number of mortgages available at 90% LTV slipped slightly from 101 at the start of March to 93 on April 6. Meanwhile, 85% LTV deals rose from 237 to 258.