Countrywide is trying to tempt lenders into offering high LTV new-build mortgages by offering to put more lower LTV business their way, in a bid to mitigate risk.
Capital requirements on 90% LTV deals can be up to eight times higher than those on low LTV products, making lenders reluctant to lend on them.
Speaking at a Mortgage Strategy round table this week Nigel Stockton, financial services director of Countrywide, says low LTVs are the biggest issue facing the new-build market and this is a way to unblock the sector safely.
He believes his proposal would give lenders a balanced portfolio and prevent over-exposure to risk.
He says: “I accept capital is the scarcest resource banks have so I’ve made offers to them because I want 90% LTV in the new-build sector.
“In exchange for that mortgage I will offer exactly the same amount of money on a remortgage under 50% LTV to mitigate the risk and build the balanced portfolio lenders are looking for.”
He adds that the reception from lenders to his proposal has been cool and none have taken it up.
He says: “The lenders say they are getting enough assets from low LTVs and they will look at criteria in due course. But in the next few months we will be looking to see how we can offer lenders a portfolio of mortgages and work with them to get the right deals.”
He says: “If I’m offering more assets at lower risk at 2:1, say, or whatever the ratio to the higher risk assets is how is that not a good deal for the lender if risk is the key metric? Let’s say if I want £200m of high LTV lending I will give the lender £400m of low LTV remortgage business to mitigate the risk.”
Adrian MacDiarmid, head of mortgage lender relations at Barratt Developments, says that the problem is top-up loans and shared equity are the only solution to low LTVs.