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High LTVs will not help FTBs on their own

The recent return by some lenders to the high LTV market after a long absence is a positive sign but it would be wrong to think this a done deal in resolving the problems first-time buyers continue to face.

While there are now more high LTV products on the shelf to choose from there are still issues for first-time buyers.

Council of Mortgage Lenders’ data shows mortgage approvals for first-time buyers are still seriously depressed from their peak before the credit crunch.

Just 15,900 loans were handed to this group in total in May 2011.

This equates to a 2.5% drop in approvals from this time last year, and our own research last year showed first-time buyer originations had fallen 89% from their peak in 2006.

So, the apparent plentiful choice for first-time buyers is misleading, and masks the true picture that is unfolding behind the scenes.

First-time buyers still have a long way to go to genuinely get access to mortgages en masse.

Capital requirements for lenders on high LTV mortgages are more onerous due to the higher risks of lending money.

As such the cost of lending to this group remains disproportionately high.

Serving this market therefore remains relatively unattractive to lenders.

Lenders are still passing on these larger costs to first-time buyers, and are far from welcoming them with open arms.

Lenders recognise the opportunity and want to be seen to help this group but they are still failing to deliver a true solution for potential first time buyer customers.

Without doubt, risk and capital are the key stumbling blocks.

But if lenders and borrowers are able to add a corporate guarantor to the risk represented by the borrower, in the form of a mortgage insurer, it diminishes the risk associated with the transaction.

It also helps banks to lower their use of capital making these loans more attractive to them and more affordable to borrowers.

Genworth has long called for a change to regulation in the UK around high LTV mortgage lending with many international regulators echoing our sentiments.

We want a wider recommendation giving sufficient and predictable incentives to lenders that use products that take risk off their balance sheets.

Despite the apparent return of first-time buyer mortgages the mortgage market remains at a crossroads.

The industry needs to a strong, long-term solution and lenders that appear to open their doors while not seriously offering help to first-time buyers doesn’t benefit anyone in the long term.


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  • Maurice Edgington 2nd September 2011 at 5:13 pm

    With a low take up of available higher ltvs just wait until the lenders realise the demand does not reach the supply and the terms will change. I am certain of this. Basic economics.

  • George Williamson 2nd September 2011 at 3:39 pm

    90% LTV is absolutly not HIGH. I and all my pals started with 100% mortgages back in the 1990’s.

    What we need is at least 95% LTV mortgages available in the market, as this will see a massive shift in buying as opposed to letting.

    Bringing back a MIG would also help with pricing, but as the numskulls in the FSA, BOE and Government allow BASEL III to progress, the market recovery will not happen.