Lenders pile into high LTV

Accord Mortgages and the Yorkshire have revealed that they may be releasing their own 125% LTV products after HBOS unveiled its high loan product last week.

Borrowers with excellent credit histories can now access the product from BM Solutions. Styled in the mould of Northern Rock’s Together deal, it combines a secured mortgage of 95% and a 30% unsecured loan.

HBOS estimates the 125% LTV market to be worth £10bn. While this is just 3% of the current market, Northern Rock has virtually had a free run of this niche sector up to now.

But that could be about to change. Along with HBOS, a growing queue of lenders are waiting to enter the 125% market.

David Holmes, corporate affairs manager at the Yorkshire, says: “A 125% LTV mortgage is on schedule for launch next year. This is not definite of course, as we can say we will do it but our research might tell us that it’s not viable.

“A product launch like this needs time to mature and we also need time to train up the sales team involved.”

Accord, the specialist lending subsidiary of the Yorkshire, is also looking at branching out into the higher LTV lending sector.

Linda Will, managing director of Accord, says: “We are looking further into raising our LTV limit to 115% but we would like to see how the 125% product performs in the market first.

“It’s essential to see how it behaves as well as how it sells, because it is a restricted audience that will be interested in such a high loan. This has to be looked at carefully.”

David Hollingworth, mortgage specialist at London & Country, says: “These products have their place but our experience indicates that the demand will be around the 100% LTV deals.

“With escalating costs such as Stamp Duty these deals aren’t as crazy as they sound so why not offer them. Lenders must be careful to remind customers that they run the risk of further negative equity if house prices fall in the future.”