High LTV loans may re-energise market

It\'s official - the UK is in recession. The news came in a week that began with the Prime Minister and chancellor holding a joint press conference to announce the latest fiscal stimulus to increase lending to consumers and business.

This came hot on the heels of the mortgage rescue scheme that will see housing associations enter shared ownership or sale-and- rent-back agreements, with vulnerable households struggling to pay their mortgage.

Further development of the Homeowner Mortgage Support Scheme is also underway. It aims to give relief to households suffering a temporary reduction in income.

And the mortgage industry is playing its part too. Attractive mortgage deals are creeping back into the market, albeit typically available to clients needing less than 60% LTV.

A number of brokers have commented on the need for a return to 90% LTV or even 95% LTV lending to re-energise the housing market and bring back confidence to the industry.

But those calling for further interest rate cuts are misguided as such action will not help borrowers. We are yet to see the full impact of the recent cuts and any more will potentially reduce the incentive to save and so reduce mortgage funding.

Something the government appears to have forgotten is that it does not matter how cheap you make money if there isn’t enough to service the demand in the first place.