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September 19, 2018

Loan-to-Value lending ratio easing in the UK's mortgage market

THE United Kingdom government’s Help to Buy scheme is boosting lending to first-ime buyers but high Loan-to- Value lending activity has fallen year-on-year, new data shows.

Overall 95 per cent LTV mortgage almost doubled under Help to Buy in the first 18 months of the scheme from January 2014 to last June, making up £3.43 [Sh529.08] of every £100 [Sh15,425] worth of mortgage lending, according to research from private mortgage insurer, Genworth.

This was up from £1.77 [Sh273.02] in the previous 18 months as more options have appeared for homeowners with smaller deposits.

However, first-time buyer and 95 per cent LTV lending activity fell year-on-year in the second quarter, marking the second quarterly decline in a row. This is the first time that has happened since 2010/2011.

Total mortgage lending across the whole market grew by £48.2 billion[Sh7,434.85]. That means as the mortgage market has grown during this period, £12.24 [Sh1,888.02] of every extra £100 [Sh15,425] lent has been via 95 per cent LTV mortgages.

Genworth’s analysis shows first-time buyers account for almost £21 [Sh3,239.25] in every £100 [Sh15,425] lent during the first half of the Help to Buy 2 [HTB2] scheme compared with £19.33 [Sh2,981.65] in the previous 18 months.

That compares with just £11.41 [Sh1,758.45] per £100 [Sh15,425] in 2007/2008, and highlights how the scheme has played an important role in encouraging first-time buyer lending.

The growth in the LTV is an encouraging sign for a sector that was hit hard by tightening credit conditions during the recession, exacerbating the challenges of raising a big enough deposit to buy a home.

But the report suggests that concerns linger for long-term health of the LTV market. Both the LTV lending and first-time buyer lending declined by value year-on-year during the second quarter of this year for a second successive quarter.

– Property Wire

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