There was a huge furore in the press when 125% LTV deals were introduced. It was argued that lenders were irresponsibly cajoling borrowers into taking on as much debt as possible, with scant regard for their ability to repay it.
Now that all the lenders in this market have pulled their products, the move has attracted little fanfare from the consumer press. Indeed, some have even complained that the pullout will cause problems for first-time buyers.
If lenders were really looking to steal every last ounce of gold out of borrowers’ pockets, why would they pull out of the 125% LTV sector? Of course, they need to make money but more importantly they offer mortgages that meet consumers’ specific needs and the market environment of the day.
When house prices were rising, 125% LTV mortgages were an app-ropriate response to the problems faced by first-time buyers. The deals were sold through brokers to ensure borrowers got the advice they needed and that only clients who could cope were given the chance to take on that level of debt.
Now the environment has changed so have lenders’ views on such products. They will have to come up with solutions to the problems now affecting first-time buyers. It is likely that they will focus on offering better terms to clients looking at shared ownership, and a lot of work has already been done on guarantor mortgages. No doubt when such products make it to market they will come under scrutiny and not all of it will be favourable.
Certainly, any new product should be looked at thoroughly. Here brokers have a vital role to play and by examining, understanding and questioning every product that is launched, they are in the best position to direct clients towards the deals that best suit their needs.
It’s no wonder that many lend-ers offering new mortgages choose to distribute them through trusted brokers in a bid to make sure they aren’t taken out by the wrong sort of borrower.
Of course we need to be on our mettle with new types of lending, but we also have to trust the market to come up with products that meet current challenges.
While appraising the risks that future products carry, hopefully commentators will also take a moment to assess how they fit into the prevailing landscape and not simply criticise them for being new.