Capital requirements on 90% LTV deals can be up to eight times higher than those on low LTV deals meaning lenders are reluctant to lend.
Speaking at a Mortgage Strategy roundtable this week Nigel Stockton, financial services director of Countrywide, says low LTVs are the biggest issue facing the market and this is a way to unlock them safely.
He believes his proposal would give lenders the balanced portfolio they desire and prevent over-exposure to risk.
He says: “I accept that capital is the scarcest resource that banks have so I’ve made offers to banks 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.”
Stockton says he has put the proposal to a number of lenders but the reception it has received has been interesting.
He says: “If I’m offering up more assets at lower risk, say at 2:1 or whatever the ratio to the higher risk assets, then how is that not a good deal for the lender if risk is the key metric?
“Let’s say I want £200m of high LTV lending then I will give you £400m of low LTV remortgage business to mitigate the risk.
“The deposit is stopping new-build and the market moving forward as borrowers can not afford 20% deposit on flats at a flat value of £150,000 and £200,000.”
Adrian MacDiarmid, head of mortgage lender relations at Barratt Developments, agrees and says the problem is that currently top-up loans and shared equity are the only solution to low LTVs.